SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549
                               -------------------


                          FORM 10-K/A (AMENDMENT NO. 1)



[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

For the fiscal year ended                   June 30, 2000
                          ------------------------------------------------------
                                                OR

[    ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

For the transition period from ____________ to ______________

                       Commission file number 1-8403
                                              ------

                      ENERGY CONVERSION DEVICES, INC.
          (Exact Name of Registrant as Specified in its Charter)


                Delaware                             38-1749884
      (State or Other Jurisdiction                (I.R.S. Employer
         of Incorporation or Organization)      Identification Number)

       1675 West Maple Road, Troy, Michigan                    48084
     (Address of Principal Executive Offices)                (Zip Code)

     Registrant's telephone number, including area code: (248) 280-1900

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

                  Common Stock, $.01 par value per share
                     Warrants to Purchase Common Stock
                    -----------------------------------
                             (Title of Class)

        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
                       Yes  X                       No
                           ---                     ---

        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x].

        The aggregate market value of stock held by non-affiliates (based upon
the closing price of such stock on the NASDAQ National Market System on
September 22, 2000) was approximately $604 million. As of September 22, 2000,
there were 219,913 shares of ECD's Class A Common Stock, 430,000 shares of ECD's
Class B Common Stock and 18,396,816 shares of ECD's Common Stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                     None


<PAGE>


                                     PART I

Item 1:   Business
------    --------
                                    OVERVIEW

        Energy Conversion Devices, Inc. (ECD) is a technology and manufacturing
company, founded by Stanford R. Ovshinsky and Iris M. Ovshinsky, engaged in the
invention, engineering, development and commercialization of new materials,
products and production technology. Under the direction of Stanford R.
Ovshinsky, principal inventor, we have established a leadership role in the
development of proprietary materials, products and production technology based
on our amorphous materials (Ovonic materials) that are engineered to have
chemical and structural disorder at the atomic level.

        We develop Ovonic materials and apply them to the development and
commercialization of new products such as nickel metal hydride (NiMH) batteries,
thin-film solar (photovoltaic) cell products and phase-change optical
memory media. These products have one or more unique chemical, electrical,
mechanical or optical properties and superior performance characteristics.

        We have established a multi-disciplinary business, scientific, technical
and manufacturing organization to commercialize products based on our
technologies. We have developed enabling proprietary technologies in the
important fields of:

        Alternative Energy Technology

                Energy Storage
                -     Rechargeable nickel metal hydride, or NiMH, batteries
                -     Ovonic Solid Hydrogen Storage Systems(TM)

                Energy Generation
                -     Ovonic Regenerative Fuel Cells(TM)
                -     Thin-film solar cells and related products

        Information Technology

                -     Ovonic Unified Memory(TM)
                -     Rewritable optical memory technology

        We manufacture and sell our proprietary products ourselves, through our
joint venture companies and through licensing arrangements with major companies
throughout the world. In addition, in support of these activities, we are
engaged in research and development, production of our proprietary materials as
well as in designing and building production machinery.


                                      -2-

<PAGE>

        Our corporate structure and the activities we conduct directly and
through our subsidiaries and joint ventures are summarized below:

Energy Storage


   Ovonic Battery Company, Inc.*        ECD --  91.4%
                                        Honda Motor Company, Ltd. (3.2%); Sanoh
                                        Industrial Co., Ltd. (3.2%) and Sanyo
                                          Electric Co. Ltd. (2.2%)
   Batteries

     GM Ovonic, L.L.C.                  General Motors Corporation --  60%
                                        Ovonic Battery Company, Inc. --  40%

     Sovlux Battery, Ltd.               ECD --  50%
                                        Chepetsky Mechanical Plant --   50%
                                          (an enterprise of the Russian
                                          Ministry of Atomic Energy)

     Rare Earth Ovonic Metal Hydride    ECD & Ovonic Battery Company, Inc.-- 19%
     Joint Venture Co. Ltd.             Inner Mongolia Baotou Steel Rare-Earth
                                          High Tech Holding Co. Ltd. -- 75%
                                        American Wako Koeki Corp. -- 6%

     Rare Earth Ovonic High Power       ECD & Ovonic Battery Company, Inc.-- 19%
     NiMH Battery Joint Venture Co.     Inner Mongolia Baotou Steel Rare-Earth
                                          High Tech Holding Co. Ltd. -- 75%
                                        American Wako Koeki Corp. -- 6%

     Rare Earth Ovonic NiMH Battery     ECD & Ovonic Battery Company, Inc.-- 19%
     Electrode Joint Venture Co. Ltd.   Inner Mongolia Baotou Steel Rare-Earth
                                          High Tech Holding Co. Ltd. -- 75%
                                        American Wako Koeki Corp. -- 6%

Energy Generation

   Fuel Cells

     Texaco Ovonic Fuel Cell            ECD -- 50%
      Company LLC                       Texaco Energy Systems -- 50%

   Photovoltaics

     United Solar Systems Corp.*        ECD --  81%
                                        Bekaert Corporation -- 19%

     Bekaert ECD Solar Systems LLC      Bekaert Corporation --  60%
                                        United Solar Systems Corp. --  40%

     Sovlux Co., Ltd.                   ECD --  50%
                                        State Research & Production Enterprise
                                          Kvant and enterprises of
                                          Minatom) -- 50%

Information Technologies

   Ovonic Unified Memory

     Ovonyx, Inc.                       ECD --  41.7%
                                        Intel Corporation; Tyler Lowrey;
                                          private investors -- 58.3%

   Optical Memory

     Ovonic Media, LLC                  ECD --  49%
                                        GE --  51%

-------
* The revenues of these entities are included in our consolidated financial
  statements.


                                      -3-

<PAGE>

        Our technologies have been successfully commercialized in products such
as NiMH consumer batteries, photovoltaic products and phase-change rewritable
optical memory disks. Other of our technologies, such as the Ovonic Regenerative
Fuel Cell(TM), our Ovonic Solid Hydrogen Storage Systems(TM) and the Ovonic
Unified Memory, require further technical development and the financial
resources of our joint venture partners in order to achieve commercial
production.

        Manufacturing activities are conducted by using our joint ventures.
ECD's principal manufacturing activity consists of machine building by our
Production Technology and Machine Building Division. The principal manufacturing
activities of Ovonic Battery Company, Inc. ("Ovonic Battery") and GM Ovonic
L.L.C ("GM Ovonic") have been battery packs, positive and negative electrodes
for NiMH batteries, and hydride materials. United Solar Systems Corp. ("United
Solar") and Bekaert ECD Solar Systems LLC ("Bekaert ECD Solar Systems")
manufacture photovoltaic products.

        The critical factor to large-scale market penetration of products
incorporating our technologies is the manufacturing of such products in
sufficient quantities to achieve economies of scale, reduce product cost and
deliver to the marketplace products that consumers need and demand.


        Certain technical terms used in this Annual Report are defined in the
section captioned "Glossary of Technical Terms" appearing at the end of this
Item 1.

                                      -4-

<PAGE>

                                MAJOR BUSINESSES

        Our business strategy is to develop and commercialize enabling
technologies for use in the fields of alternative energy and information
technologies. We are pursuing our business strategy by seeking to develop and
commercialize new products and production technologies based on our proprietary
Ovonic materials. We have established joint ventures, licensing arrangements and
other strategic alliances with major companies around the world to permit us to
achieve our strategic objectives.

        Energy activities, specifically in the areas of energy generation and
storage, represent a major element of our business strategy. Environmentally-
safe methods of generating and storing energy have become critical in today's
world. Our battery technologies, hydrogen storage materials and devices, and
photovoltaic technologies have gained worldwide recognition, particularly in
light of sustained concerns about air pollution, global climate change, ozone
layer depletion, dependence on imported oil and related concerns which may
cause international political and economic instability.

        Our information technology activities include our Ovonic Unified Memory
(OUM) which is based on our proprietary electrically-initiated phase-change
materials and can have a wide variety of computer and information technology
applications. OUM is intended to replace conventional FLASH, DRAM and SRAM
semiconductor memory and information processing devices. Our Ovonic phase-change
rewritable optical memory technology will be used in the emerging DVD rewritable
optical disk systems. The international standards for rewritable DVD media and
systems, designed by major optical disk manufacturers, specify the use of our
phase-change optical memory technology.

        Revenues for our last three fiscal years in our major business groups
were as follows:

                                             2000        1999        1998
                                            -------     -------     -------
                                            (000's)     (000's)     (000's)

         Alternative energy technology
            Energy storage                  $15,757     $23,315     $24,967
            Energy generation                 4,398       2,928       1,412
         Information technologies             4,489       2,616       1,295
         Other
            Machine building                  1,824         348         148
            Services to joint ventures        2,843       2,773       2,114
            Other                               668         992       1,622
                                            -------     -------     -------
            Total Revenues                  $29,979     $32,972     $31,558
                                            =======     =======     =======



                                      -5-

<PAGE>

        Total revenues from our manufacturing joint venture, GM Ovonic, were 14%
and 18% of total revenues in the years ended June 30, 2000 and 1999,
respectively. Revenues from another major customer, General Motors Corporation,
were 11% and 45% of total revenues in the year ended June 30, 200 and 1999,
respectively.

Alternative Energy Technology

Energy Storage.

        Rechargeable Batteries.  Using Ovonic materials, our battery subsidiary,
Ovonic Battery Company, Inc., has developed the proprietary NiMH battery
technology which has achieved recognition by major battery manufacturers
throughout the world.

        Ovonic NiMH batteries store over twice as much energy as standard nickel
cadmium (Ni-Cd) or lead acid batteries of equivalent weight. In addition, Ovonic
NiMH batteries have high power, long cycle life, are maintenance free and have
no memory effect. Moreover, Ovonic NiMH batteries do not contain cadmium or
lead, both environmentally-hazardous substances. Ovonic NiMH batteries are made
in a wide range of sizes and have a wide range of applications, including
hand-held consumer electronics; electric and hybrid electric vehicles; power
tools, utility and industrial applications; and the emerging 36/42 volt starter,
lighting and ignition (SLI) automotive applications.

        Our basic patents cover all commercial NiMH batteries. Ovonic Battery
has established a dominant patent position in the field of Ovonic NiMH
batteries, with 61 issued United States patents and 266 foreign counterparts.
There are approximately 10 patents involving our NiMH battery technology which
we believe to be important to our licensing activities. These patents have
various dates of expiration ranging from 2002 through 2018. Additional United
States and foreign patent applications are in various stages of preparation and
prosecution. In view of the overall strength of our patent position relating to
NiMH batteries, we do not believe that the expiration of our NiMH battery
patents that will expire during the next five years will have a material adverse
effect on our business.

        Ovonic NiMH batteries are manufactured and sold throughout the world by
major international companies under licensing and joint venture arrangements.
Ovonic Battery also produces the metal hydride negative electrodes and nickel
hydroxide positive electrode materials for sale to its licensees, including its
GM Ovonic joint venture. During the fiscal year ended June 30, 2000, Ovonic
Battery produced negative electrodes and positive electrode materials for sale
to certain licensees for assembly into complete batteries for consumer and
propulsion applications. It also has produced batteries for electric vehicle
(EV) and hybrid electric vehicle (HEV) applications engineered and designed for
volume production.


                                      -6-

<PAGE>

        Our royalty-bearing NiMH battery licenses provide for upfront
nonrefundable license fees of up to $5 million paid to us at the time the
license agreement is entered into. A license fee of $3 to $5 million, depending
on factors such as geographical scope and fields of application, requires
licensees to pay us a royalty of .5% (for consumer batteries) or 3% (for
propulsion batteries) of the selling price of NiMH batteries. Licensees of NiMH
batteries are granted nonexclusive, royalty-bearing licenses under our consumer
NiMH battery patents, and, in the case of certain licensees, our battery
technology, to make, have made, use, sell, lease or otherwise dispose of NiMH
batteries.  Certain licensees have paid upfront, nonrefundable license fees of
less than $3 million, but are required to pay royalty rates higher than .5% or
to pay additional license fees as their sales of NiMH batteries increase, or
have been granted substantially narrower rights to geographical areas in which
licensed products can be made or sold. Our joint ventures established to
manufacture NiMH batteries are licensees of Ovonic Battery. We acquired our
ownership interest in these joint ventures by the contribution of patents or
technology (or both).  These licenses do not require the payment of royalties
and, depending on the scope of the license, may not require the payment of
upfront nonrefundable license fees.

        All licenses can be terminated by us if the licensee fails to make
royalty payments. The licenses also can be terminated by the licensee should the
licensee determine the license is unnecessary; however, the licensee's rights to
make NiMH batteries under our patents would also terminate. Generally, the term
of the license agreements extends for so long as the patents being licensed are
in force. Some licenses have fixed terms but provide for extensions of
additional one-year periods. Based upon our present NiMH battery patent
portfolio, we believe that patents applicable to NiMH batteries can provide us
with royalty revenues through 2018.

        We are currently focusing on four principal battery markets:

        -      portable electronics and consumer applications;
        -      EV, HEV, fuel cell electric vehicle (FCEV) and fuel cell
               hybrid electric vehicle (FCHEV) batteries for propulsion
               in vehicles and light trucks;
        -      electric and hybrid electric buses and trucks;
        -      two- and three-wheeled electric vehicle propulsion.

These batteries can also serve industrial applications such as portable power
tools, utility applications, industrial uses, energy storage for remote power
generation and battery- operated industrial equipment. We also are exploring the
next generation of 36/42 volt SLI batteries in conventional automotive
applications which will require batteries with high performance at higher
voltages.


                                      -7-

<PAGE>



        Rechargeable Portable Electronics, Power Tools and Consumer Batteries.
The need for high energy density rechargeable batteries has continued to grow in
recent years. Increasing consumer dependence on portable electronic products
(such as cellular telephones, portable computers and cordless tools) has created
a large market for rechargeable batteries and has fueled development of higher
energy density battery systems. Although conventional storage batteries, such as
Ni-Cd, have been further improved in design and packaging in recent years, the
demand for higher performance batteries continues to increase. At present,
conventional Ni-Cd batteries have an energy density of 30-35
watt-hours/kilogram. Ovonic NiMH batteries are capable of having an energy
density of over 90 watt-hours/kilogram. Technology improvements have led to a
demonstration of energy density in excess of 100 watt-hours/kilogram in
prototype batteries with even higher energy densities in the process of
development.

        Ovonic NiMH batteries offer a convenient "drop in" replacement for Ni-Cd
batteries in portable electronic and household appliances. Consumer and
governmental awareness that cadmium contained in Ni-Cd batteries can cause
serious health problems has begun to move the industry away from Ni-Cd
batteries, with many European governments seeking to ban their use. The desire
of the battery industry to be cadmium-free is also a major factor in the growing
interest in Ovonic NiMH batteries.

        Ovonic Battery has licensing arrangements with many of the world's
largest battery manufacturing companies.  Its proprietary battery technology
has been licensed for consumer battery applications to Toshiba Battery Co.,
Ltd.  and Sanyo Electric Co., Ltd., (leading Japanese companies); GP Batteries
International Limited (GP  Batteries) (formerly Sylva Industries, Ltd.) in Hong
Kong, one of the world's largest manufacturers of 9-volt batteries and button
cells; Varta Batterie AG; Sovlux Battery Co. Ltd., our joint venture in Russia;
Harding Energy Inc.; Moltech Power Systems, Inc. (formerly Eveready Battery
Company, Inc.); Walsin Technology Corporation and Nan Ya Plastics Corporation
(an affiliate of Formosa Plastics Group and the assignee of Asia Pacific
Investment Co.), both leading Taiwanese companies; Samsung Electronics Co.,
Ltd. and LG Chemical, Ltd., leading Korean companies; Canon Inc., Hitachi
Maxell, Ltd., Furukawa Battery Co., Ltd. and Matsushita Battery Industrial Co.,
Ltd. (MBI), all leading Japanese companies.  In addition, the Ovonic battery
technology is being used in consumer battery applications by another consumer
battery manufacturer based in Japan.  Saft, S.A., Saft America, Inc., GS-Saft
Ltd. (Saft Group) and Japan Storage Battery Co., Ltd. are also licensed under a
royalty-bearing license agreement to Ovonic Battery's proprietary battery
technology in the United States.

        In addition to our three joint ventures in China with Rare Earth
High-Tech Co., Ltd., which are licensed for consumer battery applications, we
have entered into royalty-bearing consumer battery license agreements with two
other Chinese companies - BYD Battery Co., Ltd. and SANIK Battery Co. Ltd.


                                      -8-

<PAGE>

        Electric, Hybrid and Fuel Cell Electric, and Fuel Cell Hybrid Electric
Vehicle Batteries. The strategic importance of EVs, HEVs, FCEVs and FCHEVs both
in the United States and worldwide has increased greatly in recent years. This
heightened interest is due to many concerns such as air pollution, global
climate change, ozone layer depletion, dependence on imported oil and the high
cost of fuel.

        The California Air Resources Board, on September 8, 2000, voted to
maintain a previously-adopted mandate that, by 2003, 10% of all cars and light
trucks sold or leased in California by automobile manufacturers emit no
pollution. The mandate would require approximately 22,000 EVs per year, or
additional vehicles that emit only small amounts of pollution, such as HEVs or
FCHEVs.

        Most of the world's major automobile manufacturers have active programs
underway to develop and commercially market EVs, HEVs, FCEVs and FCHEVs. Since
Ovonic NiMH battery technology provides two to two-and-a-half times the driving
range as the same mass of lead acid batteries, the NiMH battery has become the
battery of choice for several major automobile manufacturers as they prepare to
commercialize and market EVs, HEVs, FCEVs and FCHEVs.

        In May 1999, the U.S. Department of Energy (DOE) released the results of
baseline performance testing of the General Motors EV1 and the Chevrolet S-10
electric pickup truck powered by Ovonic NiMH batteries manufactured by GM
Ovonic. According to the DOE results, the EV1 with Ovonic NiMH batteries is the
first vehicle to have a range of 220.7 miles at a constant speed of 45
miles-per-hour (mph) and 160.6 miles at a constant speed of 60 mph. In addition,
the S-10 electric pickup truck with Ovonic NiMH batteries traveled 130.6 miles
at a constant speed of 45 mph and 87.7 miles at a constant speed of 60 mph,
twice as far as the S-10 powered by the lead acid battery previously tested. The
baseline performance testing was conducted by the DOE's Field Operations Program
at the Idaho National Engineering and Environmental Laboratory.

        At the 2000 Tour de Sol Road Rally, the Ovonic NiMH batteries powered a
General Motors production EV1 to a range of 224 miles. This was the seventh
consecutive year that Ovonic batteries have powered electric vehicles beyond the
200-mile threshold.

        To illustrate the lower cost operation of battery-powered electric
vehicles, a four-door Chevrolet Geo Metro with a gasoline engine was matched
against a Solectria Force (the electric version of the Geo Metro) to measure the
operating efficiencies of the two vehicles over a 23.5-mile route through
mid-town Manhattan (New York City) at the 1998 Tour de Sol. Based upon a central
power plant efficiency rate of 51%, a power transmission efficiency rate of 92%,
a battery charger efficiency rate of 90% and a battery energy efficiency rate of
90%, the electric car's use of 2.87 kWh of electricity was the equivalent of
0.27 gallons of gasoline. The gasoline-fueled car used 2.28 gallons of gasoline.
The gasoline Geo Metro achieved 10.3 miles per gallon, while the Solectria

                                      -9-

<PAGE>

Force returned an 87 miles-per-gallon equivalent. At $1.50 per gallon, it cost
$3.42 for the Geo Metro's gasoline and the equivalent of $.41 to power the
Solectria.

        GM Ovonic. In June 1994, Ovonic Battery and General Motors formed a
joint venture, GM Ovonic, to manufacture and sell Ovonic Battery's proprietary
NiMH batteries for four-wheeled electric propulsion applications to vehicle
manufacturers on a worldwide basis. GM Ovonic is owned 40% by Ovonic Battery and
60% by General Motors. Ovonic Battery has contributed intellectual property,
licenses, production processes, know-how, personnel and engineering services
pertaining to Ovonic NiMH battery technology to the joint venture. General
Motors' contribution consists of operating capital, plant, equipment and
management personnel necessary for the production of batteries.

        Innovative Transportation Systems A.G. In May 1999, we participated in
the founding of Unique Mobility Europa, GmbH (Unique Europa) to manufacture and
sell EVs, HEVs and FCHEVs for world markets. The business and assets of Unique
Europa has been reorganized into a new company, Innovative Transportation
Systems A.G. (Innovative Transportation), based in Germany. We own an
approximately 11.7% interest in Innovative Transportation which is in the
process of building a running prototype of its product, the InnoVan, a new,
purpose-built minivan using a composite body structure and an advanced
battery-powered electric drivetrain. The InnoVan can be configured as either a
2-passenger cargo van or a 6-passenger commuter van and is designed to serve
urban transportation requirements where urban pollution concerns have restricted
the use of conventional vehicles.

        Other Vehicle Propulsion Battery Business Arrangements. In addition to
its GM Ovonic joint venture, Ovonic Battery has entered into royalty-bearing
license agreements for the manufacture of vehicle propulsion batteries and
related products outside of the United States with Sanyo, Toshiba, Hyundai Motor
Company, Varta, Nan Ya, GP Batteries and Sovlux Battery. Sanyo, Toshiba,
Hyundai, GP Batteries and Sovlux Battery have restricted rights to export
vehicle propulsion batteries to North America. Varta's license includes the
right to manufacture vehicle propulsion batteries subject to certain limitations
on access to technology and restrictions on manufacturing in North America. Saft
Group is licensed under a royalty-bearing license agreement for the manufacture
and sale of vehicle propulsion batteries in the United States.

        Ovonic Battery is responding to significant interest by bus
manufacturers seeking to comply with government initiatives for providing
pollution-free mass transportation in urban areas. Ovonic Battery has a bus
demonstration program in the City of Rome, Italy, pursuant to which an Ovonic
NiMH battery pack replaced an existing lead acid battery, providing three times
the range on a single charge. This permits continuous operation over an entire
shift, eliminating expensive downtime and labor costs.


                                      -10-

<PAGE>

        Ovonic Battery has developed a "Family of Batteries" that can satisfy
the energy storage needs of the full spectrum of EVs, HEVs, FCEVs and FCHEVs,
including bicycles, two- and three-wheeled scooters, cars, trucks and vans. This
internally-sponsored development was based on the demonstrated ability of NiMH
batteries to be engineered for different energy and power densities in a wide
range of capacities. The automotive industry has expressed considerable interest
in batteries for the emerging HEV market and Ovonic Battery is positioning
itself to offer the industry a high power, durable, high charge/discharge rate
NiMH battery. Ovonic Battery has demonstrated the power capabilities of its
prototype HEV battery at 1000 watts per kilogram. Ovonic NiMH batteries for HEVs
are being reviewed with a variety of potential customers. This "Family of
Batteries" program is intended to provide next- and future-generation NiMH
batteries. Both EV and HEV types of NiMH batteries are included in the program
with the objective of increasing the energy density of future batteries as well
as reducing their size and cost.

        Ovonic Battery's HEV battery, developed under its "Family of Batteries"
program, meets specifications set by the Partnership for Next Generation of
Vehicles, a program among DaimlerChrysler Corporation, Ford Motor Company,
General Motors and the U.S. Department of Commerce. As presently designed for
production, Ovonic NiMH batteries tested for HEVs have the following performance
characteristics:

                   Specific Energy:               70 watt-hours/kg.
                   Peak Power:                    625 watts/kg.
                   Regenerative Power:            600 watts/kg.

        Two- and Three-Wheeled Vehicles. Ovonic Battery has installed Ovonic
NiMH batteries in scooters converted to electric power and successfully
demonstrated the application of its battery for two- and three-wheeled electric
vehicles. Ovonic Battery considers two- and three-wheeled electric vehicles and
power-assisted bicycles a potential large-volume market since these types of
vehicles are the primary mode of transportation in many European and developing
countries throughout the world, such as India, China and Taiwan. Electric two-
and three-wheeled vehicles using Ovonic NiMH batteries should improve the acute
air pollution problems in these regions caused by conventional two- and
three-wheeled vehicles. Scooters powered by Ovonic NiMH batteries have won many
awards. Most recently, at the 2000 Tour de Sol, the Ovonic scooter was the
overall first place winner among the one-person vehicle entries, achieving a
range of 73 miles with an efficiency equivalent to more than 300 miles per
gallon of gasoline.

        We have entered into royalty-bearing license agreements for the
manufacture and sale of Ovonic NiMH batteries for two- and three-wheeled
vehicles with Sanyo, Walsin, Sanoh Industrial Co., Ltd. and Nan Ya.

        Sanoh, a licensee in Japan, has expanded its production of NiMH
batteries for two-wheeled electric vehicle applications at its plant in Koga,
Japan.  Among Sanoh's

                                      -11-

<PAGE>

customers are large manufacturers of electric scooters and bicycles such as
Honda Motor Company, Ltd. who has announced plans to introduce new products.

        In February 1998, we and EV Global Motors announced a strategic alliance
to cooperate in further development and commercialization of light-power-assist
EVs using EV Global vehicles and our energy storage technologies. In forming
this strategic alliance, we and EV Global exchanged shares of each other's
Common Stock. EV Global also transferred to us certain shares of the Common
Stock of Unique Mobility, Inc. held by EV Global, which in May 1999 were
exchanged for shares of Unique Europa (now Innovative Transportation).

        Sovlux Battery. In March 1998, we announced the formation of Sovlux
Battery, an affiliate of Sovlux, our U.S.-Russian joint venture. Sovlux Battery,
owned 50% by us and 50% by the Chepetsky Mechanical Plant in Glazov, Russia,
plans to produce NiMH battery materials and components for sale to Ovonic
Battery and its licensees. In the longer term, Sovlux Battery expects to
manufacture batteries for the emerging two- and three-wheeled electric vehicle
market in Europe and Asia and for four-wheeled electric vehicles in Russia. Our
contribution to Sovlux Battery in return for our 50% interest consisted of
licenses, know-how and proprietary technology.

        The availability of abundant Russian raw materials for the battery,
Chepetsky's alloy processing and production expertise, and joint collaboration
on battery research and development could provide the potential for substantial
reductions in the cost of Ovonic Battery's proprietary NiMH batteries.

        Other Battery Applications. Several licensees of Ovonic NiMH battery
technology, such as Sovlux, Canon and GM Ovonic, have been granted rights to
manufacture and sell large batteries for energy storage applications for
electricity generated by photovoltaic, remote power generation, utility
applications and battery-operated industrial equipment. There are numerous other
applications for Ovonic NiMH batteries where portable energy storage is required
or convenient.

        Solid Hydrogen Storage Materials and Devices. Hydrogen energy technology
has been a part of our scientific work and business strategy since our founding
in 1960.

        No other potential fuel source approaches the ideal fuel other than
hydrogen. It is clean and efficient and it yields more energy per unit of weight
than any other existing fuel. Hydrogen's only waste product is water vapor.
Because hydrogen is a major component of water and of hydrocarbons, it is in
abundant supply.

        The principal stumbling blocks to the use of hydrogen as a fuel have
been the costly and inefficient energy extraction process and the inability to
store hydrogen safely and efficiently. Conventional methods of storing hydrogen
have been high-pressure

                                      -12-

<PAGE>

compressed gas and liquification at extremely low temperatures. Using these
methods of storage allow just 31 grams of hydrogen per liter to be stored at a
high pressure of 5,000 psi and 71 grams per liter in liquid form at the
extremely low temperature of -253(0)C. Hydrogen liquification requires a
tremendous amount of energy (approximately 10 kWh of electric energy to liquify
1 kilogram of hydrogen), expensive cryogenic storage tanks, and liquid hydrogen
evaporates at a rate of 2-5% per day.

        We have developed a new, practical approach to store hydrogen in a safe
and economical manner using a family of new efficient metal hydrides based upon
our proprietary, atomically-engineered materials technology which stores
hydrogen in a solid metal matrix at low pressure. Compared to high pressure
compressed gas or liquification, our Ovonic Solid Hydrogen Storage Systems(TM)
technology is capable of storing 103 grams of hydrogen per liter. Our advanced
hydride materials have been shown to store up to 7% hydrogen by weight, or the
equivalent of 780 standard liters of hydrogen per kilogram of hydride materials.
We have a basic patent position in the metal hydride field with 74 U.S. and 214
foreign patents applicable to hydrogen energy storage.

        Some of the more fundamental patents applicable to our nickel metal
hydride battery technology also provide us with a proprietary position in our
solid hydrogen storage in metal hydride materials technology. We do not believe
that the expiration of any patent applicable to our solid hydrogen storage
materials technology during the next five years will have a material adverse
effect on our business.

        Our solid hydrogen storage materials can be packaged in a variety of
sizes and shapes to meet application requirements - from automobiles to consumer
electronic devices. For example, we are currently designing compact hydrogen
storage canisters that can store hydrogen to operate lawnmowers, garden
equipment, power generators or even barbecue grilles.

        Our metal hydride systems have proven to be safe in tests conducted in
cooperation with automobile manufacturers. This is a critically important
attribute that carries over to metal hydrides engineered for hydrogen storage.
Our tests also indicate that metal hydride systems will provide more than 2,000
refilling cycles (equivalent to more than 200,000 miles in an automobile) with
no performance degradation.

        Among other applications, our advancements in metal hydrides facilitate
storing sufficient hydrogen to power an FCEV for several hundred miles. To
provide 300 miles of range in an advanced FCEV, six kilograms of hydrogen
storage capacity are required. Such capacity is expected to occupy 120 liters of
space and weighs 120 kilograms, including the refueling heat exchanger, high
efficiency insulation, and a hydrogen fueled catalytic burner to generate the
heat necessary to release the stored hydrogen.


                                      -13-

<PAGE>

        Our Ovonic Solid Hydrogen Systems(TM) technology requires further
technical and product development as well as financial resources to reach
commercial product status.

        We are completing a development program, under a cost-sharing contract
awarded by the U.S. Department of Commerce through its National Institute of
Standards and Technology (NIST) Advanced Technology Program (ATP), relating to
metal hydride materials for use in NiMH batteries and our Ovonic Solid Hydrogen
Storage Systems(TM).

        Under a DOE-sponsored program, we are developing an integrated renewable
hydrogen-generation storage system. This system uses water electrolysis to
convert the electricity produced by our multi-junction photovoltaic products to
hydrogen and stores the produced hydrogen in metal hydride hydrogen storage
devices. The system is being designed for residential or small-scale commercial
production of hydrogen which can be used to replace conventional fuels as
sources of energy conversion. This program commenced in May 1997 and is
currently scheduled to be completed in August 2001. This contract is a standard
R&D cost-sharing contract, which requires us to bear 50% of the overall costs of
this program, with standard termination provisions. We expect to recognize
revenue of approximately $2 million during the term of this contract. We retain
the technology rights for any inventions or other discoveries under this
program. DOE has so- called "march-in rights" under standard government
contracts of this type to use, or have others use, this technology on a
royalty-free basis under certain conditions.

Energy Generation.

        Ovonic Regenerative Fuel Cells(TM). On September 21, 2000, we and Texaco
Energy Systems, Inc. (TESI) formed a joint venture, Texaco Ovonic Fuel Cell
Company, LLC (Texaco Ovonic Fuel Cell) to further develop and advance the
commercialization of the Ovonic Regenerative Fuel Cell(TM) technology. TESI is
a wholly-owned subsidiary of Texaco and is focused on commercialization efforts
in fuel cells and other advanced energy technologies, including the development
of viable fuel-processing technology for fuel cells. We and TESI each own 50% of
Texaco Ovonic Fuel Cell. The initial funding of Texaco Ovonic Fuel Cell from
TESI for initial product and market development is approximately $40 million.
Our contribution to Texaco Ovonic Fuel Cell in return for our 50% interest
consisted of licenses, know-how and proprietary technology.

        The Ovonic Regenerative Fuel Cells(TM) are electrochemical devices that
include two electrodes, an anode and a cathode. Between the two electrodes is a
solid or liquid electrolyte that allows ions to pass through, but prevents
electrons from passing through. Hydrogen, which enters the cathode, and oxygen,
which enters the anode, are converted into water (a byproduct) and electrical
energy.



                                      -14-

<PAGE>
        Our unique, low-cost, proprietary materials technology does not rely on
expensive and rare noble metals such as platinum, and can provide significantly
superior performance and lower costs as compared to other technologies, such as
proton exchange membrane (PEM) fuel cells.

        Most of the patents applicable to our NiMH battery technology are also
applicable to our Ovonic Regenerative Fuel Cell(TM) technology. These patents
have various dates of expiration ranging from 2002 through 2018. We do not
believe that the expiration of any patent applicable to Ovonic Regenerative Fuel
Cell(TM) technology during the next five years will have a material adverse
effect on our business.

        The principal differences between PEM fuel cells and Ovonic Regenerative
Fuel Cell(TM) technology lie in the costs of materials required to make each,
the processes by which they operate and in operating temperature ranges. PEM
fuel cells require platinum in the electrodes and a costly proton exchange
membrane. The Ovonic Regenerative Fuel Cell(TM), by contrast, will require no
costly precious metal in its electrodes and no membrane. By using a hydrogen
storage material, a metal hydride, as an electrode, the Ovonic Regenerative Fuel
Cell(TM) will provide immediately-available hydrogen as fuel, thus providing
instant start capability with no lag time between start-up and availability of
electricity. Further, the Ovonic Regenerative Fuel Cell(TM) will be able to
accept incoming electrical energy, such as from regenerative braking, the effect
of which is to cause further hydrogen fuel to be stored within the hydrogen
storage electrode thereby becoming available as fuel. The PEM fuel cell has no
such ability for storage of hydrogen to make it immediately available as fuel.
Additionally, a PEM fuel cell's operating temperature is in the narrow
60(degree)C - 80(degree)C range while the Ovonic Regenerative Fuel Cell(TM) is
able to operate anywhere within the range of about -20(degree)C - +120(degree)C.

        The Ovonic Regenerative Fuel Cell(TM) technology is being developed for
commercial use in a full range of stationary and portable power applications,
which can eliminate dependence on electricity supplied through grid distribution
or portable fossil-fuel-powered generators. Our fuel cell also has the potential
to deliver high efficiency levels, a wide operating temperature range, and
instant start capability. Its ability to store energy during braking makes it
ideal for vehicle applications.

        Our Ovonic Regenerative Fuel Cell(TM) technology requires further
technical and product development and the financial resources of our joint
venture partner, TESI, to reach commercial product status.

        Photovoltaic Technology. Photovoltaic (PV) systems provide a clean and
simple solid-state method for direct conversion of sunlight into electrical
energy. The major barrier to the widespread use of direct solar-to-electrical
energy conversion has been the lack of an inexpensive solar cell technology. We
originated the continuous web, multilayer, large- area thin-film amorphous
silicon (a-Si) technology, and, together with our joint venture,



                                      -15-

<PAGE>

United Solar Systems Corp., are leaders in thin-film amorphous photovoltaic
technology. We have invented a unique proprietary approach in materials and to
the manufacture of thin-film photovoltaic products. Compared to PV products that
are produced by other PV technologies, our PV products are substantially
lighter, more rugged, require much less energy to produce and can be produced in
high volume at significantly lower cost. We believe that in large volume (100
megawatts) production, our PV products can become price competitive to
conventional fuels.  Our proprietary position in photovoltaic technology ranges
from the invention of materials and the development of products to the design
and manufacture of production equipment.  We and United Solar have more than 173
U.S. patents and numerous foreign counterpart patents in the area of
photovoltaic technology.

        Because many of our patents are so broad and because our patent
portfolio is so extensive, we do not consider the expiration of any patent
applicable to PV technology to be material. In view of the overall strength of
our patent position relating to PV technology, we do not believe that the
expiration of our PV technology patents that will expire in the next five years
will have a material adverse effect on our business.

        Crystalline silicon was the original materials technology used by the
photovoltaic industry. First widely used in space satellites, conventional
crystalline silicon solar cells are fabricated in a step-and-repeat, batch
process from small wafers of single crystal or polycrystalline silicon
semiconductor materials. Notwithstanding the substantial advances that have been
made in the development of this technology, the cost of crystalline photovoltaic
modules still is high because of high materials costs and because many
processing steps are needed to manufacture the modules. Crystalline silicon
solar cell modules also are bulky and break easily and consume more energy in
their manufacture.

        There are other thin-film technologies for producing solar cells using
materials such as cadmium and selenium which are not environmentally friendly
and require that care be taken with the products using such materials during
manufacturing and after sale. These other thin-film technologies, as well as
crystalline silicon technology, have not been applied in a continuous
roll-to-roll manufacturing process which does not employ a step-and-repeat batch
process.

          Using our proprietary thin-film, vapor-deposited a-Si alloy materials,
we have developed proprietary technology to reduce the materials cost in a solar
cell. Because a-Si absorbs light more efficiently than its crystalline
counterpart, the a-Si solar cell thickness can be 100 times less, thereby
significantly reducing materials cost. By utilizing a flexible, stainless steel
substrate and polymer-based encapsulants, United Solar's PV products can be very
lightweight, flexible and abuse-tolerant. They do not break during shipping, are
particularly easy to transport to remote rural areas, thus saving shipping
costs, and can be installed without breakage.


                                      -16-

<PAGE>

        Amorphous cells with different light absorption properties also can be
deposited one on top of another to capture the broad solar spectrum more
effectively, which increases the energy conversion efficiency of the multi-cell
device and improves performance stability. This unique multi-junction approach
has resulted in world record efficiencies for our a-Si technology. United Solar
has been awarded an "R&D 100" award by R&D Magazine for its triple-junction
amorphous silicon solar electric module. The magazine's editors and staff,
together with outside experts, reviewed thousands of new inventions to determine
the 100 most significant advances of 1998.

        We have advanced our pioneering work in amorphous silicon alloy
photovoltaic through United Solar and hold current world records for both large-
and small-area conversion efficiency for amorphous silicon solar cells, as
measured by the DOE's National Renewable Energy Laboratory (NREL). Conversion
efficiency is the percentage of sunlight that is converted into electricity.
United Solar has achieved a world record of 10.2% stabilized energy conversion
efficiency for large area (one-square foot) amorphous silicon alloy photovoltaic
modules, which the DOE characterized in 1994 as a major breakthrough. United
Solar holds the world records for amorphous silicon alloy photovoltaic cells,
including solar-to-electricity stabilized efficiency of 13% for small-area
amorphous silicon alloy photovoltaic cells.

        To further reduce the manufacturing cost of photovoltaic modules, we
have pioneered the development of and have the fundamental patents on a unique
approach utilizing proprietary continuous roll-to-roll solar cell deposition
process. Using a roll of flexible stainless steel that is a half-mile long and
14 inches wide, nine thin-film layers of a-Si alloy are deposited sequentially
in a high yield, automated machine to make a continuous, stacked three-cell
structure. The roll of solar cell material then is processed further for use in
a variety of photovoltaic products. This basic approach, pioneered by us, is
unique in the industry and has significant manufacturing cost advantages. We
believe that, in high-volume production, our photovoltaic modules will be
significantly less expensive than conventional crystalline silicon and other
thin-film solar modules produced on glass and can be cost competitive with
fossil fuels.

        We have formed joint ventures to manufacture PV modules and systems and
to sell them throughout the world.

        In April 2000, we entered into a strategic alliance with N.V. Bekaert
S.A., a leading worldwide manufacturer of steel wire, steel wire products and
steel cord, and a fast- growing manufacturer of advanced materials. Bekaert's
market and technological leadership is based on metal-forming and a wide range
of coating technologies. It is based in Kortrijk, Belgium, with over 70
production centers worldwide and a workforce of 17,000 employees.

                                      -17-

<PAGE>

        As part of our alliance, Bekaert acquired the shares in United Solar
formerly held by Canon and we formed a new joint venture company, Bekaert ECD
Solar Systems LLC, which will assemble PV modules, provide systems integration
and market and sell PV products. Bekaert now holds a 19% interest in United
Solar. Bekaert ECD Solar Systems is owned 40% by United Solar and 60% by
Bekaert.

        Bekaert's total investment commitment relating to our strategic alliance
is $84 million, which includes $24 million which was provided to ECD as partial
payment to purchase Canon's stock in United Solar and an investment of
$60 million in United Solar and in Bekaert ECD Solar Systems. All of this
investment is expected to be funded by the end of calendar year 2001 except for
the last $12 million which will be funded before 2004. A portion of the funds
invested by Bekaert in United Solar will be used to purchase new manufacturing
equipment, which we will supply, with an annual capacity of 25 megawatts.
A portion of the investment in Bekaert ECD Solar Systems will be used to
implement an expanded sales and marketing program for PV products. Our
contribution to United Solar in return for our ownership interest consisted of
licenses, know-how and proprietary technology.

        United Solar and Bekaert ECD Solar Systems are producing a variety of PV
products and selling PV modules and systems throughout the world. They
manufacture products for remote power applications, telecommunications,
PV-powered lighting systems, building-integrated photovoltaic systems and marine
applications at the Troy, Michigan facilities.

        United Solar and Bekaert ECD Solar Systems recently announced that they
had selected Auburn Hills, Michigan, for their new manufacturing plant.
Approximately $63 million is expected to be invested in this new,
state-of-the-art solar facility which will expand manufacturing capacity
five-fold with the 25 megawatt annual capacity photovoltaic manufacturing
equipment being designed and built by our Production Technology and Machine
Building Division.

        Based on research and development conducted by us in the early 1980s, we
and United Solar have developed, and United Solar and Bekaert ECD Solar Systems
are manufacturing and selling, unique products for the building industry such as
PV shingles metal roofing products and PV laminate products which emulate
conventional roofing materials in form, construction, function and installation.
United Solar received the Popular Science 1996 "Best of What's New" Grand Award,
and it received the Discover Magazine 1997 "Technology Innovation Award" for its
flexible solar shingles.

        United Solar is also building on ECD's development of ultralight weight
PV technology and developing PV products for space applications. The global
telecommunications revolution is expected to result in the launch of large
constellations of low earth orbit satellites and high altitude platforms in the
next decade which will require
                                      -18-

<PAGE>

lower cost, lighter weight PV modules than those currently used in space. United
Solar's PV cells, initially developed by ECD, are radiation hard, perform very
well at the high temperatures encountered in space and can be significantly
lighter than conventional technologies as well as less expensive.

        In December 1998, United Solar's ultralight space solar modules were
successfully installed on the MIR Space Station. The cells have gone through
thousands of thermal cycles under space conditions successfully, and have
demonstrated reliable space performance without any degradation. United Solar's
installation on the MIR marks the first time advanced thin-film amorphous solar
modules have been installed on an orbiting spacecraft.

        In April 2000, upon the successful completion of a Phase I contract, we
were awarded a two-year cost-sharing contract by the U.S. Air Force to further
advance our proprietary PV space technology. Under this contract, we and United
Solar will develop laser-integrated ultralight, thin-film amorphous
silicon-based solar panels on Kapton(R), a lightweight, 1 to 2 mil thick plastic
substrate, for auxiliary spacecraft power systems. The technology being
developed is capable of providing 2500 watts per kilogram which is dramatically
higher than 30-50 watts per kilogram currently available, with savings of
approximately $500,000 per satellite launch.

        In 1990, we formed Sovlux Co., Ltd., a joint venture with State Research
and Production Enterprise Kvant (Kvant) to manufacture our photovoltaic products
in the countries of the former Soviet Union. We own 50% of Sovlux. In 1990,
Kvant entered into machine-building contracts with us for the construction of
2MW-capacity pilot photovoltaic manufacturing equipment. The equipment has been
installed in Sovlux's plant in Moscow. Kvant contributed this equipment to the
joint venture in exchange for its ownership interest in Sovlux. Sovlux has
received various U.S. Government contracts in 1998 and 1999 in connection with
certain of its operations.

        Sovlux has conducted pre-production activities consisting of
manufacturing plant preparation and machinery optimization. It has manufactured
PV products; however, it has not been able to commence volume production of
photovoltaic products due to current economic conditions in Russia.

        For more than 13 years, ECD has been engaged in research contracts
awarded by the DOE and NREL aimed at further development of high-efficiency
amorphous silicon- based alloy thin-film solar cells, improvement of
photovoltaic manufacturing technologies, and the development and demonstration
of photovoltaic systems to be used in rooftop construction in lieu of
conventional shingles and other roofing materials.

        In June 1998, we were awarded a three-year cost-sharing program by DOE
and NREL to further advance our proprietary roll-to-roll PV manufacturing
technology. This
                                      -19-

<PAGE>
program is part of the DOE's ongoing initiatives to enhance U.S. leadership in
the world PV market through improved PV manufacturing processes and reduced
manufacturing costs.

Information Technologies.

        We have developed a number of key proprietary products and processes in
the field of information technology.

        Ovonic Unified Memory.  On the basis of our pioneering technology, we
developed the first nonvolatile semiconductor memory, the Ovonic Electrically
Erasable Programmable Read Only Memory, for computer data storage in the 1960s.
We have

advanced and extended that early work and have developed a proprietary family of
high-performance nonvolatile semiconductor memory and information processing
devices, called Ovonic Unified Memory (OUM).

        In January 1999, we and Mr. Tyler Lowrey, the former vice
chairman and chief technology officer of Micron Technology, Inc., formed a
strategic alliance (a corporation was formed on June 23, 1999), Ovonyx, Inc.
(initially owned 50% by ECD and the balance owned by Mr. Lowrey together with an
affiliate of Mr. Lowrey), to commercialize OUM. Our contribution to Ovonyx, in
return for our ownership interest, consisted of licenses and proprietary
technology. In February 2000, Ovonyx formed a strategic alliance with Intel in
which Intel Capital, and other investors, made an equity investment in Ovonyx.
Additionally, Ovonyx granted Intel a nonexclusive royalty-bearing license and
began a joint development program utilizing one of Intel's wafer fabrication
facilities. As a result, we currently own 41.7% of Ovonyx.

        OUM is designed to provide nonvolatile computer data storage with the
speed of current volatile DRAM semiconductor system memory as well as to
decrease the cost of production. OUM also offers an opportunity to develop new,
fast computer architectures so as to eliminate the use of multiple tiers of
memory as well as data transfer bottlenecks caused by the current computer
memory hierarchy. By removing the distinction between archival storage and
system memory, data can be stored in a nonvolatile fashion and "executed in
place," resulting in improved computer performance and lower costs of data
transfer than those associated with the currently used memory hierarchy. We
believe that OUM can, in a single device, replace the multiple memory types of
devices which are used in today's personal computers.

        Another application of OUM is intended for use in the rapidly growing
FLASH memory market. FLASH memory is used in portable electronic devices such as
laptop computers, pagers, and cellular telephones as all-solid-state, low-power
replacements for magnetic hard disk storage. Another important application of
Ovonic memory and the Ovonic Threshold Switch can provide a basis for practical,
highly complex, three-
                                      -20-

<PAGE>

dimensional neural network systems for use in advanced artificial intelligence
and speech- and image-pattern recognition. Because OUM memory can provide the
capability to store more than one bit of information per memory cell, it can
allow the fabrication of semiconductor memory with high storage density. An
application under development is the use of OUM in electronic cash and smart
card systems that require information to be stored in an encrypted, secure and
tamperproof manner.

        In November 1999, Ovonyx and Lockheed Martin Space Electronics &
Communications entered into a royalty-bearing agreement to commercialize the OUM
technology to replace FLASH, DRAM, FPGA and other electronic devices in
radiation-hardened space and military applications.

        Our OUM technology requires further technical development and financial
resources to reach commercial product status.

        Optical Memory. We are the inventor and originator of phase-change
rewritable optical memory disk technology. Our Ovonic phase-change rewritable
optical memory technology makes it possible to store, in a convenient, removable
disk format, many times the amount of data as a conventional floppy magnetic
disks, and is a much more robust product having much lower cost than removable
rigid magnetic disks. Our proprietary phase-change rewritable optical memory
uses a laser to write or erase digital data on a thin film of amorphous
semiconductor alloy that has been deposited onto a substrate disk. The disk and
data-reading process are similar to an ordinary CD or CD-ROM, with the
significant difference being that the phase-change rewritable optical memory can
be erased and rewritten many times (1,000 in the case of CD-RW and 500,000 in
the case of DVD- RAM).

        We have licensed our phase-change rewritable optical memory technology
to 13 companies and expect to license others who are developing phase-change
optical memory products. Among our licensees are Matsushita/Panasonic, Ricoh,
Sony, Toshiba, Asahi, Hitachi, Plasmon, Toray, TDK and Teijin.

        Our rewritable phase-change optical memory licenses provide for an
advance royalty payment of $25,000 paid to us at the inception of the license
agreement. Generally, licensees pay us a royalty of 1-1/2% of the net
selling price of the rewritable optical memory disks for the first one
million sold and 1% of the net selling price thereafter. Licensees are granted
nonexclusive, royalty-bearing, worldwide licenses under our rewritable
phase-change optical memory patents in existence at the time the license is
granted to make, have made, use, sell, lease or otherwise dispose of rewritable
optical memory disks. The licenses can be terminated by us if the licensee fails
to make royalty payments or can be terminated by the licensee, in which event
the licensee's rights to make optical memory disks under our patents would also
terminate. The term of the

                                      -21-

<PAGE>

license agreements extends as long as the patents are in force. Our present
portfolio of patents covering rewritable optical memory products does not expire
until 2011.

        A "convergence" of the information processing, communications and
entertainment industries is taking place as a result of advances in digital
electronics. A new and emerging "convergence" product offering higher-capacity
data storage is the DVD. Playback-only DVD disks and drives (DVD-ROM) are
commercially available now. Our high-capacity phase-change optical memory
technology is well established as the technology of choice for rewritable DVD
media.

        Our optical memory licensees now producing phase-change optical media,
as well as other storage media manufacturers, are expected to become
manufacturers of rewritable DVD products. Due to their high data storage
capacity, the leading manufacturers in the optical disk industry are targeting a
wide range of computer and information technology applications for
DVD-rewritable disks, including digital television recording.

        Following the successful development of technology under a NIST ATP
project, we and General Electric, through its GE Plastics business unit, formed
a strategic alliance in March 2000, the first activity of which was the creation
of a joint venture, Ovonic Media, LLC. GE owns 51% of Ovonic Media and we own
49%. We have contributed intellectual property and licenses and will contribute
other assets to the joint venture. GE will make cash and other contributions to
the joint venture. We received a multi-million dollar contract from Ovonic Media
to design, develop, demonstrate and commercialize our proprietary continuous web
roll-to-roll technology for the ultra-high-speed manufacture of optical media
products, primarily rewritable DVDs.

        We are completing a development program under another NIST ATP project
relating to our optical memory technologies. This program involves the goal of
increasing the storage capacity of DVD-compatible optical storage technologies
by a factor of 10 and significantly increasing the data transfer rate, making it
possible to store two hours or more of high-definition television content, or
thousands of professional-quality high-resolution still photos, on a single
disk.

Thin-Film Synthetic Materials.

        ECD has developed a range of vapor-deposited thin-film materials and
cost-effective roll-to-roll production technologies, including a high-rate
microwave plasma-enhanced chemical vapor deposition (MPCVD) process. The major
commercial application for this technology are high-performance optical
coatings.

        Optical Films. Another important application for transparent thin-film
coatings which are deposited using our cost-effective roll-to-roll production
technologies is in thin-
                                      -22-

<PAGE>

film optical coatings which selectively absorb, reflect or transmit certain
types of electromagnetic radiation. These coatings have a wide range of
commercial applications--from anti-glare screens for computer and television
displays to solar-controlled windows for architectural and automotive
applications. In February 1999, we received a contract from Southwall
Technologies, Inc. to build proprietary large-area MPCVD equipment. In July
2000, our Production Technology and Machine Building Division delivered the
large area roll-to-roll MPCVD machine to Southwall. This is the first commercial
machine utilizing our passive coatings technology, and is expected to provide a
platform for commercialization of our passive coatings technology and related
equipment.

        Vapor Barrier Films. Our MPCVD process also has been applied in the
development of a novel, low-cost, transparent vapor barrier coating for plastic
beverage containers and flexible packaging films. An extremely thin coating
(less than 1 millionth of an inch, or 1/50th of the wavelength of visible light)
of our MPCVD amorphous silicon oxide (quartz glass) improved the oxygen and
water vapor barrier of commodity and rigid packaging films by about a factor
of 100. By blocking oxygen and water vapor

transmission, the shelf life of food beverages, pharmaceuticals and other
types of sensitive products is extended.

               PRODUCTION TECHNOLOGY AND MACHINE BUILDING DIVISION
                       AND CENTRAL ANALYTICAL LABORATORY

        Our Production Technology and Machine Building Division operates as a
profit center for our machine-building and engineering activities. It has
extensive experience in designing and building proprietary automated production
equipment. The Production Technology and Machine Building Division has designed
and built for us and our licensees multiple generations of photovoltaic
production lines, including United Solar's existing machinery and equipment for
solar cells capable of producing 5 megawatts of electricity on an annual basis,
as well as research, development and manufacturing equipment for batteries,
vapor barrier coating and other materials technology. We are completing the
design and engineering work in connection with the construction of United
Solar's 25 megawatt annual capacity equipment.

        Our Central Analytical Laboratory conducts analysis of materials
produced by us and our joint venture partners and licensees as well as materials
produced by other companies. We also maintain an advanced materials technology
group that supports the efforts of each of our business areas, including the
manufacture of high quality sputtering targets and advanced powdered metals.

                        RESEARCH AND PRODUCT DEVELOPMENT

        The nature of our business has required, and will continue to require,
expenditures for research and product development to support our commercial
activities. The United States government agencies and our licensees and
industrial partners have partially

                                      -23-

<PAGE>

funded our research and product development activities. The materials,
production technologies and products being developed and produced by us and our
joint venture partners are technologically sophisticated and are designed for
markets characterized by rapid technological change and competition based, in
large part, upon technological and product performance advantages.

        As of June 30, 2000, the amount of future revenues we were entitled to
receive under contracts with government agencies totaled approximately $6.5
million, $1.5 million of which was not funded by the government as of June 30,
2000. These contracts are cancelable at any time with provisions to reimburse us
for any costs through the termination date. The Company's government contracts,
which have partially funded development of limited portions of certain areas of
the Company's technologies, provide the government with "march-in rights" to
use, or have others use, technologies developed under the applicable contract on
a royalty-free basis under certain conditions.  The U.S. government has not
exercised its "march-in rights" with respect to any technologies developed by
the Company under such contracts.

        The following is a summary of our consolidated direct expenditures,
excluding the allocation of patents, depreciation and general and administrative
expenses, for product


research and development for the three years ended June 30, 2000. All of our
research and development costs are expensed as incurred.

                             Direct Research and Development Expenditures

                                            Year Ended June 30,
                                 -----------------------------------------
                                     2000          1999           1998
                                    ------        -------        ------

Sponsored by licensees,          $ 8,333,348    $14,403,073    $12,464,256
   government agencies
   and industrial partners

Sponsored by us                   11,863,416      8,381,514      8,782,943
                                 -----------    ------------   -----------
                                 $20,196,764    $22,784,587    $21,247,199
                                 ===========    ===========    ===========


                  SOURCES AND AVAILABILITY OF RAW MATERIALS

        Materials, parts, supplies and services used in our business are
generally available from a variety of sources. However, interruptions in
production or delivery of these goods and services could have an adverse impact
on our manufacturing operations. The key raw materials used in our business are
metals, primarily nickel, titanium, manganese and cobalt and stainless steel;
high purity industrial gases, primarily argon, nitrogen, hydrogen, silane,
disilane and germane; and polymer materials.


                                      -24-

<PAGE>

                         PATENTS AND PROPRIETARY RIGHTS

        Since our founding in 1960, we have focused our research and development
efforts on amorphous, disordered and related materials, a previously
unrecognized field of materials science that has since attracted widespread
attention. We have established a multi-disciplinary business, scientific and
technical organization ranging from research and development to manufacturing
and selling products as well as designing and building production machinery,
activities which we recognize need to be carefully protected. Our extensive
patent portfolio consists of 363 United States patents and 840 foreign
counterparts, and includes numerous basic and fundamental patents applicable to
each of our lines of business. We invent not only materials, but also develop
low-cost production technologies and high-performance products. Our patents,
therefore, cover not only materials, but also the production technology and
products we develop.

        Three patents, which we consider to be important to our business, will
expire during 2001 and 2002; however, we do not expect the expiration of these
patents to adversely affect our business prospects. Because we have generated
other patents which broadly cover our business, we believe that our proprietary
patent position will be sustained notwithstanding the expiration of these
patents.

        We believe that worldwide patent protection is important for us to
compete effectively in the marketplace. Certain of our patents have been the
subject of legal actions, all of which have been resolved in our favor prior to
trial.

                           CONCENTRATION OF REVENUES

        See Note B of the Notes to Consolidated Financial Statements on page
70 of this Report.

                                  BACKLOG

        Our backlog of orders as of August 31, 2000 for battery packs,
electrodes and machine-building contracts is $66,121,000. The backlog at August
31, 1999 was $2,871,000 for battery packs, electrodes and machine-building
contracts. We expect to recognize $24,715,000 of backlog in 2001.

                                COMPETITION

        Because each of our technologies has the potential to replace certain
existing energy storage, energy generation and information technology products,
competition for products based on our technologies comes from new technologies,
improvements to current technologies and improved products from current
technologies.



                                      -25-

<PAGE>

        We also compete with companies that currently manufacture and distribute
products based on well-established technologies in the fields of energy
generation and storage and information technology. Some of the firms with which
we compete are among the largest industrial companies in the world. Many of our
competitors have established product lines, extensive financial, manufacturing
and marketing resources, and large research and development staffs and
facilities.

        We believe our success will depend primarily on our ability to apply our
technologies to the development and production of proprietary products and
production technologies that offer significant advantages in performance,
efficiency, cost and environmental friendliness over competing products and
technologies. We expect to maintain our competitive position by diligently
prosecuting patents, designing innovative applications for our technologies,
removing costs from our technology applications, developing volume manufacturing
processes, and continuing to form strategic relationships with leading
companies.

        Many of our technologies, such as those in the field of energy
generation and storage, compete with well-established existing technologies.
There are likely to be substantial transition costs incurred in switching from
existing technologies to new technologies in these fields. Until we are able to
achieve cost reductions through increased production volumes, the costs to
produce products based on our technologies may also be significantly higher than
the cost of products based on existing technologies. These factors may combine
to provide companies offering products based on existing technologies with a
competitive advantage.

                                   EMPLOYEES

        As of September 22, 2000, we had a total of 399 employees, of which 160
are Ovonic Battery employees and 72 are United Solar employees. The above
numbers do not include employees of our joint ventures or licensees. We consider
our relations with our employees to be excellent.


           CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
     PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

        This Annual Report on Form 10-K contains forward-looking statements
about our financial condition, results of operations, plans, objectives, future
performance and business. In addition, from time to time we and our
representatives have made or may make forward-looking statements orally or in
writing. The words "may," "will," "believes," "expects," "intends,"
"anticipates," "estimates," and similar expressions have been used in this
Annual Report to identify forward-looking statements.


                                      -26-

<PAGE>

        We have based these forward-looking statements on our current
expectations with respect to future events and occurrences. Investors are
cautioned that our actual results in the future may differ materially from the
expected results reflected in our forward-looking statements. The expected
results reflected in our forward-looking statements are subject to various
significant risks and uncertainties, including the following:

       -    we may be unable to continue to protect and maintain the
            proprietary nature of our technology, or to convince others of
            the necessity of licensing our technology without litigation;

       -    other companies may be successful in asserting patent
            infringement or other claims against us which prevent us from
            commercializing products based on our technology or which force
            us to make royalty or other payments to competitors;

       -    other companies may develop competing technologies which cause
            our technology to become obsolete or non-competitive;

       -    our licensees and joint venture partners may be unwilling or
            unable to devote their financial resources and manufacturing and
            marketing capabilities to commercialize products based on our
            technologies;

       -    we may be unable to successfully execute our internal business
            plans;

       -    we may need to obtain additional debt or equity financing to
            continue to operate our business and financing may be unavailable
            or available only on disadvantageous terms;

       -    we may experience performance problems with key suppliers or
            subcontractors;

       -    adverse changes may occur in general economic conditions or in
            political or competitive forces affecting our business;

       -    competition may increase in our industry or markets;

       -    our government product development or research contracts may be
            terminated by unilateral government action or we may be
            unsuccessful in obtaining new government contracts to replace
            those which have been terminated or completed;

       -    we may become subject to legal or regulatory proceedings which
            may reach unfavorable resolutions;


                                      -27-

<PAGE>

       -    there may be adverse changes in the securities markets which
            affect the price of our stock; or

       -    we may suffer the loss of key personnel or may be unable to
            attract and retain qualified personnel to maintain and expand
            our business.

        There is also the risk that we incorrectly analyze these risks or that
strategies we develop to address them are unsuccessful.

        These forward-looking statements speak only as of the date of this
Annual Report. All subsequent written and oral forward-looking statements
attributable to us or any person acting on our behalf are qualified in their
entirety by the cautionary statements in this section. Because of these risks,
uncertainties and assumptions, you should not place undue reliance on these
forward-looking statements. We are not obligated to update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.




                                      -28-

<PAGE>

                           GLOSSARY OF TECHNICAL TERMS

        Certain technical terms used herein have the following meanings:

Amorphous - having an atomic structure that is not periodic.

CD-ROM (CD--Read Only Memory) - a type of data-storage media using a CD
format with pre-recorded data which cannot be recorded by the user.

CD-RW (CD--Rewritable Memory) - a type of data storage media using a CD
format employing ECD's proprietary phase-change rewritable optical memory
technology capable of being recorded and re-recorded many times.

Crystalline - having a repeating atomic structure in all three dimensions.

Cycle Life - the number of times a rechargeable battery can be charged
and discharged.

Disordered - Minimizing and lifting of lattice constraints which
provides new degrees of freedom, permitting the placement of elements in
multi-dimensional spaces where they interact in ways not previously available.
This allows the use of multi-elements and complex materials where positional,
translational and compositional disorder remove restrictions so new local order
environments can be generated controlling the physical, electronic and chemical
properties of the material, thereby permitting the synthesis of new materials
with new mechanisms.

DRAM (Dynamic Random Access Memory) - a type of semiconductor memory
device used for the main system memory in most computers.

Electrode (battery) - the chemically active portions of a battery.

Energy Density - the amount of energy stored in a specific volume or
weight.

EV (Electric Vehicle) - a vehicle propelled exclusively by an electric
drive system powered by an electrochemical energy storage device, typically a
rechargeable battery.

FLASH - a type of semiconductor memory device that retains stored data
even with the power off.

FCEV (Fuel Cell Electric Vehicle) - an electric vehicle that derives its
electricity from a fuel cell.

FCHEV (Fuel Cell Hybrid Electric Vehicle) - a vehicle that is propelled both by
a fuel cell and an electrochemical energy storage device coupled to an electric
drive.

FPGA (Field-Programmable Gate Array) - is an integrated circuit having thousands
of logic gates that can be programmed by an end user to perform complex
functions.

                                      -29-

<PAGE>

Fuel Cell - a device which produces electric power by oxidizing hydrogen and
exhausting only water as a byproduct.

HEV (Hybrid Electric Vehicle) - a vehicle that is propelled both by an
electrochemical energy storage device coupled to an electric drive and an
auxiliary power unit powered by a conventional fuel such as reformulated
gasoline, direct injection diesel, compressed natural gas or hydrogen.

Nonvolatile - a property of some types of computer memory which retain
stored data even when power is removed.

Optical Memory - a computer memory technology that uses lasers to record
and play back data stored on a rotating disc.

Ovonic - [after S.R. Ov(shinsky) + (electr)onic] - the term used to
describe our proprietary materials, products and technologies.

Peak Power - the maximum amount of energy available for a sustained period of
time, typically 10 to 30 seconds.

Phase-Change Rewritable - an optical memory technology invented by us in
which data is stored or erased on memory media by means of a laser beam that
switches the structural phase of a thin-film material between crystalline and
amorphous states.

Photovoltaic (PV) - direct conversion of light into electrical energy.

Regenerative Power - the amount of energy made available and returned to the
battery by the recovery of kinetic energy.

Roll-to-Roll Process - a process where a roll of substrate is continuously
converted into a roll of product.

Semiconductor - a class of materials with special electrical properties used to
fabricate solar cells, transistors, integrated circuits and other electronic
devices.

Specific Energy - the amount of energy capacity divided by the weight of the
battery.

SRAM (Static Random Access Memory) - a type of very fast semiconductor
memory device used for high-speed transfers of relatively small data blocks to
the main processor in a computer.

Stabilized Energy Conversion Efficiency - the long-term ratio of electrical
output to light input.

Thin Film - a very thin layer of material formed on a substrate.



                                      -30-

<PAGE>

Item 2:  Properties
------   ----------

        A summary of our principal facilities and those of our consolidated
subsidiaries, Ovonic Battery and United Solar, follows:



                                                      Number of
               Location                              Square Feet
               --------                              -----------

               ECD:
               1675 West Maple Road, Troy, MI          31,550
               1050 East Square Lake Road, MI          11,000
               1621 Northwood, Troy, MI                27,480


               Ovonic Battery:
               1864 Northwood, Troy, MI                12,480
               1826 Northwood, Troy, MI                12,480
               1707 Northwood, Troy, MI                27,400
               1334 Maplelawn, Troy, MI                28,100
               1414 Combermere, Troy, MI                9,870


               United Solar:
               1100 West Maple Road, Troy, MI          47,775
                                                       ------

               TOTAL                                  208,135
                                                      =======


        Except for the property located at 1050 East Square Lake Road,
Bloomfield Township, MI, which is owned by us, the foregoing properties, which
are generally of brick and block construction, are leased by us. Except for the
property located at 1334 Maplelawn, Troy, MI, which is subleased to GM Ovonic,
the foregoing properties are devoted primarily to the product development,
production and pre-production activities and administrative and other operations
of ECD, Ovonic Battery and United Solar.

                                      -31-

<PAGE>


Management believes that the above facilities are generally adequate for present
operations.

Item 3:  Legal Proceedings
------   -----------------

        We are not a party to any legal proceedings which management believes to
be material.


Item 4:  Submission of Matters to a Vote of Security Holders
------   ---------------------------------------------------

        Not applicable.


                                      -32-

<PAGE>

                                    PART II

Item 5:  Market for Registrant's Common Equity and Related Stockholder Matters
------   ---------------------------------------------------------------------

      Shares of our Common Stock, par value $.01 per share ("Common Stock"),
trade on the NASDAQ National Market System under the symbol "ENER." Shares of
our Class A Common Stock, par value $.01 per share ("Class A Common Stock"), and
Class B Common Stock, par value $.01 per share ("Class B Common Stock"), are not
publicly traded.

      As of September 22, 2000, there were approximately 2,490 holders of record
of Common Stock, four holders of record of Class A Common Stock and one holder
of record of Class B Common Stock.

      Below is the reported high and low price on the NASDAQ National Market
System for our Common Stock for the following quarters:

                       For the Fiscal Year Ended June 30
                            (in Dollars Per Share)


                                2001                2000              1999
                          ----------------    ---------------   ----------------

                            High     Low       High     Low       High     Low
                            ----     ---       ----     ---       ----     ---
First Quarter             $40.375  $22.063    $15.00  $ 9.188   $10.250  $ 5.188
(through Sept. 22,
2000)

Second Quarter                                $11.313 $ 8.00    $ 8.125  $ 4.625

Third Quarter                                 $31.438 $ 9.00    $12.938  $  7.50

Fourth Quarter                                $27.375 $11.50    $10.50   $ 7.625



      We have not paid any cash dividends in the past and do not expect to pay
any in the foreseeable future.


                                      -33-
<PAGE>

      During the fiscal year ended June 30, 2000, we issued the following
securities to the following parties for the consideration noted.  In each case,
the offering was to an extremely limited number of persons who had complete
access to all material information relating to the Company.  Accordingly, we
claim exemption from the registration requirements of Section 5 of the
Securities Act of 1933 pursuant to Section 4(2) of that Act, no public offering
having been involved.

Party/ies          Security Issued  Number of Securities   Consideration
---------          ---------------  --------------------   -------------

Canon              Common Stock     700,000 shares         Partial consideration
                                                           valued at $12,758,000
                                                           for purchase of
                                                           Canon's interest in
                                                           United Solar

Texaco            Common Stock      3,74,800 shares        $67,370,400

7 members of      Common Stock      3,542 shares           Services rendered
our Board of                                               valued at approxi-
Directors                                                  mately $35,000

EV Global Motors  Common Stock      49,888 shares          Cashless exercise of
                                                           133,658 warrants
                                                           valued at approxi-
                                                           mately $2,000,000

GE Plastics       Warrants to       400,000 warrants      $400,000
                  acquire Common
                  Stock

      During the fiscal year ended June 30, 2000, we issued 28 shares of our
Common Stock to one person for no consideration pursuant to their exchange of
certain Convertible Investment Certificates for Common Stock.  We claim
exemption from the registration requirements of Section 5 of the Securities Act
of 1933 pursuant to Section 3(a)(9) of that Act, for an exchange of securities
with an existing security holder exclusively, where no commission or other
remuneration is paid for soliciting such exchange.

      Pursuant to the Stock Purchase Agreement between ECD and Texaco Inc. dated
as of May 1, 2000, Texaco purchased a 20% equity stake in ECD for $67.4 million.
As part of this Stock Purchase Agreement, Texaco has rights to purchase
additional shares of ECD Common Stock or other ECD securities (ECD Stock).  So
long as Texaco owns more than 5% of ECD Stock and in the event ECD issues
additional

                                     -34-

<PAGE>


ECD Stock other than to Texaco, Texaco has the right to purchase additional ECD
Stock in order for Texaco to maintain its same proportionate interest in ECD
Stock as Texaco held prior to the issuance of the additional ECD Stock. If
Texaco elects to purchase ECD Common Stock, the purchase price shall be the
average of the closing price on NASDAQ of the ECD Common Stock as reported in
The Wall Street Journal for the five trading days prior to the closing date of
the sale multiplied by the number of shares of the ECD Common Stock which Texaco
is entitled to purchase.

      If Texaco does not exercise its right to purchase additional ECD Stock
within 15 days after delivery of a Rights Notice from ECD, Texaco's right to
purchase such additional ECD Stock which are the subject of the Rights Notice
shall terminate. William M. Wicker and James R. Metzger, directors of ECD, are
respectively Senior Vice President and Vice President and Chief Technology
Officer of Texaco.


                                     -35-
<PAGE>

Item 6:  Selected Financial Data
------   -----------------------

        Set forth below is certain financial information taken from the
Company's audited consolidated financial statements (See Item 1: Description of
Business).
<TABLE>
<CAPTION>

                                                                          June 30,
                                     ------------------------------------------------------------------------------
Revenues:                                2000             1999             1998            1997            1996
---------                            -------------    -------------    ------------    ------------    ------------
<S>                                  <C>              <C>              <C>             <C>             <C>

Product sales                        $   6,892,355    $  4,524,238    $  9,858,343    $ 14,897,144    $ 14,828,133
Royalties                                3,440,164       2,735,622       2,485,981       1,394,872       1,321,117
Revenues from product development
  agreements                            10,418,985      17,240,615      14,321,416       5,738,877       7,349,195
Revenues from license and other
  agreements                             3,138,000       4,753,995       1,701,134       5,828,648      12,524,262
Other                                    6,089,581       3,717,826       3,190,707       1,718,933       1,289,667
                                     -------------    ------------    ------------    -------------   ------------

     TOTAL REVENUES                     29,979,085      32,972,296      31,557,581      29,578,474      37,312,374
                                     -------------    ------------    -------------   ------------   -------------

Net Income (Loss)                    $ (16,656,128)   $(13,777,589)   $(16,664,999)   $(17,954,612)  $   1,054,269
                                     ==============   =============   =============   =============  =============

Basic Net Income (Loss) per
  Common Share                       $       (1.16)   $      (1.06)   $      (1.50)   $      (1.67)  $         .11

Diluted Net Income (Loss) per
  Common Share                       $       (1.16)   $      (1.06)   $      (1.50)   $      (1.67)  $         .10

At year end:
 Cash and Cash Equivalents           $  44,592,017    $  19,076,983   $  25,786,112   $ 14,270,145   $  23,773,742
  Investments                        $  44,723,500    $      -        $      -        $     -        $      -
 Total Assets                        $ 148,905,642    $  39,807,998   $  51,360,816   $ 37,729,097   $  57,129,439
 Long-Term Liabilities               $  20,059,353    $   2,679,936   $   3,967,496   $    585,795   $   1,853,728
 Working Capital                     $  89,789,457    $  18,438,953   $  29,800,158   $ 23,161,108   $  43,524,927
 Stockholders' Equity                $  98,776,560    $  23,188,627   $  34,815,346   $ 26,418,659   $  43,734,040


</TABLE>

                                                   -36-
<PAGE>

Item 7:  Management's Discussion and Analysis of Financial Condition and Results
------   -----------------------------------------------------------------------
         of Operations
         -------------

                         Results of Operations

Year Ended June 30, 2000 Compared to Year Ended June 30, 1999
-------------------------------------------------------------

        The Company has continued to invest to further advance its technologies.
These investments in its technologies have led to historic new strategic
alliances over the past nine months with Texaco Inc., N.V. Bekaert S.A. and its
U.S.-based subsidiary (Bekaert), Intel Corporation, General Electric Company,
Lockheed Martin Space Electronics and Communications and China's Rare Earth
High-Tech Co. Ltd. of Baotou Steel Company (Rare Earth High-Tech). According to
generally accepted accounting principles as practiced in the United States
(GAAP), the investments the Company makes in its technologies are expensed as
research and development expense in the periods in which they are incurred and
the value of these technologies are not carried as assets in the Company's
balance sheet.

        The Company had a net loss in the year ended June 30, 2000, of
$16,656,000 compared to a net loss of $13,778,000 for the year ended June 30,
1999. The change resulted primarily from a reduction in revenues to $29,979,000
in 2000 from $32,972,000 in 1999 and a $52,000 decrease in operating expenses.
Ovonic Battery's revenues decreased to $16,365,000 in 2000 from $25,687,000 in
1999. The change in revenues in 2000 was due to changes in revenues from our
major customers. The total revenues received from our joint venture, GM Ovonic,
was reduced from 18% of total revenues in 1999 to 14% of total revenues in 2000
due to the fact that, in 2000, GM Ovonic, which is not included in ECD's
consolidated financial statements, began to manufacture its own positive
electrodes. Revenues from another major customer, General Motors, decreased from
45% of total revenues in 1999 to 11% of total revenues in 2000. This decrease
was due to the conclusion in 2000 of the Company's product development program
with GM.  Partially offsetting these reductions were a $3,928,000 increase in
ECD's revenues, primarily from machine building and revenues from product
development agreements, and the inclusion of United Solar's results after
April 11, 2000.

        The change in revenues primarily resulted from lower revenues from
license and other agreements ($1,616,000) and revenues from product development
agreements ($6,822,000) partially offset by higher product sales ($2,368,000)
and royalties ($705,000).  Revenues from license agreements include $1,778,000
from a license agreement with Toshiba Battery Company Ltd., $1,000,000 from
Sanyo Electric Co., Ltd. and $360,000 from Japan Storage Battery Co., Ltd.,
compared to a $4,400,000 license fee in 1999 from Sanyo.  Other revenues are
primarily related to personnel, facilities and miscellaneous administrative
and laboratory services provided to some of the Company's joint ventures.
Revenues increased by $2,372,000 to $6,090,000 in the year ended June 30, 2000
from $3,718,000 in the year ended June 30, 1999.  This increase was due to
revenues of $2,686,000 from Ovonyx, Inc. and $1,098,000 from Bekaert ECD Solar
Systems LLC,
                                      -37-

<PAGE>

partially offset by lower billings to GM Ovonic.  The revenues from Ovonyx
relate to personnel, facilities and miscellaneous administrative and laboratory
services provided by the Company beginning in January 1999.  Revenues from
GM Ovonic are lower because we were leasing fewer of our employees to GM Ovonic.

        The ECD/Ovonic Battery programs in the Ovonic nickel metal hydride
(NiMH) battery technology have led to a new family of batteries not only for
hybrid electric vehicles (HEVs), electric vehicles (EVs) and fuel cell electric
vehicles (FCEVs), but also for a new universal battery platform that has
included a much-needed addition to the starter, lighting and ignition battery
field where especially high voltages are required. ECD's continued investments
in its battery, solid hydride, and fuel cell development programs, as well as
its activities at United Solar and Bekaert ECD Solar Systems are all reported as
losses. Losses related to electrode production and the ongoing protection of the
Company's intellectual property also contributed to the 2000 losses. In addition
to the loss from operations, the Company incurred other expense (net) of
$721,000 in the year ended June 30, 2000, compared to other expense (net) of
$784,000 in the same period in the prior year.

        Product sales, consisting of positive and negative battery electrodes,
battery packs, machine building and photovoltaic products (for United Solar
since April 11, 2000), increased 52% to $6,892,000 in the year ended June 30,
2000 from $4,524,000 in the year ended June 30, 1999. Battery pack sales
increased 41% to $1,493,000 in 2000 from $1,060,000 in 1999 and machine-building
revenues increased 424% to $1,824,000 in 2000 from $348,000 in 1999. The
machine-building revenues in both years related to a contract to build
large-area deposition equipment, which was accounted for using
percentage-of-completion accounting and for which work was primarily completed
during 2000. Battery pack sales increased due to orders from customers primarily
related to evaluation of battery packs for possible use in their products. Sales
of negative and positive electrodes decreased $1,753,000, primarily due to one
of the Company's principal negative electrode licensees currently manufacturing
its own electrode products as allowed under its license from the Company.
Photovoltaic sales for the period from April 11, 2000 (the date United Solar was
consolidated) through June 30, 2000 were $2,212,000.

        Royalties increased 26% to $3,440,000 in the year ended June 30, 2000
from $2,736,000 in the year ended June 30, 1999. While the volume of NiMH
batteries currently being sold has increased substantially, the royalties the
Company receives continue to reflect increased production efficiencies of its
licensees which have resulted in lower prices as licensees move aggressively to
increase market share. (See NOTE B - Notes to Consolidated Financial
Statements.)


                                      -38-

<PAGE>

        Revenues from product development agreements decreased 40% from
$17,241,000 in the year ended June 30, 1999 to $10,419,000 in the year ended
June 30, 2000. There were increases in revenues from the Shell Hydrogen program
(which concluded in 2000) ($750,000 in 2000 compared to none in 1999) and the
hydrogen storage program with the Department of Energy (DOE) ($781,000 in 2000
compared to $191,000 in 1999). These increases in 2000 were more than offset by
decreases in revenues resulting from completing programs, after having
successfully met program objectives, with General Motors to develop batteries
for electric and hybrid electric vehicle applications ($1,002,000 in 2000
compared to $8,039,000 in 1999) and with the National Institute of Standards
and Technology (NIST) for a new, low-cost manufacturing system for DVDs based on
ECD's proprietary phase-change optical memory technology ($3,883,000 in 2000
compared to $5,606,000 in 1999), which resulted in establishing a new joint
venture, Ovonic Media LLC, with General Electric. Contracts with DOE and
National Renewable Energy Laboratory (NREL) in photovoltaics also had decreased
revenues ($1,733,000 in 2000 compared to $2,928,000 in 1999). This net decrease
in photovoltaics revenues was due to decreased revenues ($551,000) from
contracts which had been completed in 1999 and had no revenues in 2000,
decreased revenues ($719,000) from contracts which were completed in 2000,
reduced revenues ($470,000) from a contract with a lower level of funding in
2000, partially offset by increased revenues ($545,000) from contracts which
were new or had increased funding in 2000. (See Note B - Notes to Consolidated
Financial Statements.)

        The Company has $6,560,000 in unrecognized revenues outstanding under
product development agreements with the U.S. government or other agencies or
companies. Without giving effect to any new product development agreements which
may be entered into in the year ending June 30, 2001 and based upon scheduled
funding and performance, $5,695,000 is expected to be recorded in revenues from
product development agreements for the year ending June 30, 2001.

        Revenues from license and other agreements decreased 34% from $4,754,000
in the year ended June 30, 1999 to $3,138,000 in the year ended June 30, 2000.
The 2000 revenues included a $1,778,000 license fee from Toshiba Battery;
$1,000,000 from Sanyo, which had previously been deferred from the agreement
entered into with Sanyo in October 1998; and $360,000 from Japan Storage. The
1999 license fees included $4,400,000 from Sanyo. Revenues from license and
other agreements depend on a small number of new business arrangements, are
sporadic and vary dramatically from period to period.

        Other revenues are primarily related to personnel, facilities and
miscellaneous administrative and laboratory services provided to some of the
Company's joint ventures. Revenues increased by $2,372,000 to $6,090,000 in the
year ended June 30, 2000 from $3,718,000 in the year ended June 30, 1999.  This
increase was due to revenues of $2,686,000 from Ovonyx and $1,098,000 from
Bekaert ECD Solar Systems, partially offset by lower billings to GM Ovonic. The
revenues from Ovonyx relate to personnel, facilities and administrative and
laboratory services provided by the

                                      -39-

<PAGE>

Company beginning in January 1999.  Revenues from GM Ovonic are lower because
we were leasing fewer of our employees to GM Ovonic.

        The $1,788,000 increase in cost of product sales in the year ended June
30, 2000 results from the $2,368,000 increase in product sales. The reduced loss
on product sales from $3,612,000 to $3,032,000 is a result of improved quality
control of the manufacturing process and the achievement of ISO 9002
certification. While the Company has taken significant steps to reduce costs,
the low sales volume, primarily of negative electrodes, combined with high fixed
costs, result in the loss on product sales. The Company has continued its
development of advanced electrode materials to be introduced to its customers.

        The Company incurred expenses for product development of $25,523,000
($10,373,000 funded and $15,150,000 unfunded) in the year ended June 30, 2000,
compared to expenses of $29,243,000 ($17,361,000 funded and $11,882,000
unfunded) in the year ended June 30, 1999. The expenditures continued the
development of the Company's core technologies: NiMH batteries, hydrogen
storage, energy generation, and information storage and retrieval devices.

        Expenses were incurred in 2000 and 1999 in connection with the
protection of the Company's United States and foreign patents covering its
proprietary technologies. These expenses increased to $1,750,000 in the year
ended June 30, 2000 from $1,656,000 in the year ended June 30, 1999.

        The increase in operating, general and administrative expenses from
$6,930,000 in the year ended June 30, 1999 to $8,717,000 in the year ended June
30, 2000 was due to the fact that United Solar's operating, general and
administrative expenses ($682,000) were included in the Company's consolidated
financial statements effective April 11, 2000. In addition, $1,098,000 of the
increase was due to decreased allocations to cost of revenues from product
development agreements and $220,000 of the increase was due to increased
depreciation expenses in 2000.

        Other expense (net) was $784,000 in the year ended June 30, 1999,
compared to other expense (net) of $721,000 in the year ended June 30, 2000. Due
primarily to better operating performance at United Solar (expenses at United
Solar were reduced by $1,353,000 on flat revenues), the Company incurred reduced
charges for equity losses of $2,463,000 in 2000 compared to $3,660,000 in 1999.
As required under GAAP, the Company recorded losses representing the Company's
share of the losses of United Solar (prior to April 11, 2000) and Bekaert ECD
Solar Systems regardless of the value of these investments. Also, included in
other expense (net) in 2000 is $182,000 of income for minority interest share of
losses related to Bekaert's share of United Solar's losses.  (See NOTES A and D
of Notes to Consolidated Financial Statements for further discussions of
United Solar and the Company's accounting for United Solar). Also, interest
income increased to $1,576,000 in 2000 compared to $1,187,000 in 1999.  In

                                      -40-

<PAGE>

1999, a $1,970,000 gain was recognized related to the sale of Ovonic Battery
Company, Inc. (Ovonic Battery) stock to Sanyo.

        The Company does business in many different parts of the world and its
royalty revenues are affected by changes in foreign currencies and their
exchange rates relative to the U.S. dollar.  However, the vast majority of the
Company's business agreements are denominated in U.S. dollars and, as such,
the Company has minimized its exposure to currency rate fluctuations.

Year Ended June 30, 1999 Compared to Year Ended June 30, 1998
-------------------------------------------------------------

        The Company had a net loss in the year ended June 30, 1999 of
$13,778,000 compared to a net loss of $16,665,000 for the year ended June 30,
1998. The loss was primarily due to: (i) ongoing product development and
continued market development activities, (ii) losses related to electrode
production, (iii) ongoing protection of the Company's intellectual property, and
(iv) development costs of Ovonic Unified Memory (OUM) microelectronic
nonvolatile, thin-film semiconductor devices. The amount of the net loss for
1999 was partially offset by a $1,970,000 gain on the sale of Ovonic Battery
stock and a $4,400,000 license fee from Sanyo. Additionally, included in other
income (expense) for 1999 was an expense of $3,660,000 representing ECD's equity
in the net loss from its investment in the United Solar joint venture, as
required under GAAP, related to ECD's cash investments in United Solar.

        While the Company experienced an overall increase in revenue in 1999 as
compared to 1998, it did experience a decrease in total revenue received from
one of its major customers, GP Batteries. This decrease from 23% of total
revenue in 1998 to less than 10% in 1999 was due to the fact that GP Batteries
began to manufacture its own negative electrodes in 1999.

        Product sales, consisting of positive and negative battery electrodes,
battery packs and machine building, decreased 54% to $4,524,000 in the year
ended June 30, 1999 from $9,858,000 in the year ended June 30, 1998. Sales of
negative and positive electrodes decreased $6,179,000 in 1999 due to reduced
sales to two of the Company's largest customers. As previously noted, GP
Batteries, a licensee of the Company, began in 1999 to manufacture its own
negative electrodes rather than purchasing them from the Company. This resulted
in a reduction in sales of $6,625,000 to this customer in 1999. In addition,
our joint venture, GM Ovonic, which is not included in ECD's consolidated
financial statements, began in 1999 to manufacture its own positive electrodes
rather than purchasing them from the Company. This resulted in a reduction in
sales of $987,000 to GM Ovonic in 1999. Battery pack sales increased 156% from
$414,000 to $1,060,000 in 1999. Revenues from machine building were $348,000
in 1999, compared to $148,000 in 1998. The Company received a contract to build
large-area microwave deposition

                                      -41-

<PAGE>

equipment in February 1999 and recognized revenue of $330,000 in connection
with this contract.

        Royalties increased 10% to $2,736,000 in the year ended June 30, 1999
from $2,486,000 in the year ended June 30, 1998 primarily due to higher battery
royalties. While the volume of NiMH batteries sold increased substantially, the
royalties the Company received reflected increased production efficiencies of
its licensees which have resulted in lower prices as licensees move aggressively
to increase market share.  (See NOTE B - Notes to Consolidated Financial
Statements.)

        Revenues from product development agreements increased 20% to
$17,241,000 in the year ended June 30, 1999 from $14,321,000 in the year ended
June 30, 1998 due to substantially increased revenues from a program with
General Motors to develop batteries for electric and hybrid electric vehicle
applications ($8,039,000 in 1999 compared to $6,995,000 in 1998) and from
contracts with NIST in the Company's battery and optical memory technologies
($5,606,000 in 1999 compared to $1,797,000 in 1998). Revenues from product
development agreements for ECD's photovoltaic technology increased 107% to
$2,928,000 in the year ended June 30, 1999 from $1,412,000 in the year ended
June 30, 1998. In 1998, there were certain adjustments which reduced revenues to
reflect a change in estimate based on information received by the Company
pertaining to certain customers and contracts. $990,000 of the adjustment
related to years prior to 1998. (See NOTE B - Notes to Consolidated Financial
Statements.)

        Revenues from license and other agreements increased 179% to $4,754,000
in the year ended June 30, 1999 from $1,701,000 in the year ended June 30, 1998
due to (i) a $4,400,000 battery license fee from Sanyo in 1999, (ii) $190,000 in
license fees in 1999 in connection with a new optical memory license agreement
with Ricoh Company Limited of Tokyo, Japan, the world's largest manufacturer of
rewritable compact disks and (iii) a battery license agreement with Japan
Storage, a Japanese battery manufacturing company. License fees in 1998 included
$1,500,000 related to a technology transfer agreement with Sovlux Battery and
the Chepetsky Mechanical Plant, an enterprise of the Russian Ministry of Atomic
Energy. Revenues from license agreements are nonrecurring and are based upon
developing new business relationships.

        Other revenues increased by $527,000 (or 17%) to $3,718,000 in the year
ended June 30, 1999, from $3,191,000 in the year ended June 30, 1998 primarily
due to increased billings in 1999 for work performed for Ovonic Battery
licensees and for additional work performed by ECD's Production Technology and
Machine Building Division.

        The Company incurred expenses of $29,243,000 ($17,361,000 funded and
$11,882,000 unfunded) in the year ended June 30, 1999 for product development
compared to expenses of $27,031,000 ($15,606,000 funded and $11,425,000
unfunded) in the year ended June 30, 1998. The expenditures were primarily for
continued
                                      -42-

<PAGE>

development of the Company's "family of batteries" products as well as
work performed on the OUM program. The increased expenses of $2,212,000 for
product development were offset by the $2,919,000 increase in revenues from
product development agreements.

        The decrease in cost of product sales to $8,136,000 in the year ended
June 30, 1999, from $12,673,000 in the year ended June 30, 1998 was due to the
reduced level of battery electrode sales.

        Expenses were incurred in 1999 and 1998 in connection with the
protection of Ovonic Battery's United States patents covering its proprietary
technology for NiMH batteries. These expenses were reduced to $302,000 in the
year ended June 30, 1999 from $363,000 in the year ended June 30, 1998.

        Operating, general and administrative expenses increased 1% to
$6,930,000 in the year ended June 30, 1999 from $6,828,000 in the year ended
June 30, 1998 primarily due to reduced allocations in 1999 to cost of revenues
from product development agreements, costs associated with a restricted stock
grant to one of the Company's executives, increased costs associated with
stockholder relations and other increased costs in 1999.

        Other income (net) of $180,000 in the year ended June 30, 1998 compared
to other expense (net) of $784,000 in the year ended June 30, 1999. The $964,000
reduction was due to a $3,660,000 expense (versus $384,000 in 1998) representing
the Company's equity in the net loss in its investment in United Solar (the
Company first made a cash investment in United Solar in May 1998; therefore, the
1998 loss represents ECD's one-month share of United Solar's losses while 1999
represents a full year) and higher interest expense, partially offset by a
$1,970,000 gain on the sale of Ovonic Battery stock in 1999 and higher interest
income. This $3,660,000 expense is related to ECD's cash investments in United
Solar's future growth.

        The Company does business in many different parts of the world and its
royalty revenues are affected by changes in foreign currencies and their
exchange rates relative to the U.S. dollar. However, the vast majority of the
Company's business agreements are denominated in U.S. dollars and, as such, the
Company has minimized its exposure to currency rate fluctuations.


                        Liquidity and Capital Resources

        As of June 30, 2000, the Company had unrestricted consolidated cash,
cash equivalents, investments and accounts receivable (including $8,893,000 of
amounts due from related parties) of $105,381,000, an increase of $78,584,000
from June 30, 1999. As of June 30, 2000, the Company had consolidated working
capital of $89,789,000 compared with a consolidated working capital of
$18,439,000 as of June 30, 1999.



                                      -43-

<PAGE>

         During the year ended June 30, 2000, of the Company's $89,316,000 cash,
cash equivalents and investments, the Company purchased $44,673,000 of
investments consisting of commercial paper, classified as available for sale,
maturing from 91 days to 33 months. It is the Company's policy that investments
shall be rated "A" or higher by Moody's or Standard and Poor's, no single
investment shall represent more than 10% of the portfolio and at least 20% of
the total portfolio shall have maturities of less than 90 days.

        The Company's strategy is to finance its operations and growth through
strategic alliances (joint ventures and license agreements) with third parties
who can provide financial resources and marketing expertise for the Company's
technologies and products. Over the past several months, the Company has entered
into a number of historic business agreements bringing the Company's short-term
cash reserves to approximately $90 million and having a significant positive
impact on future cash flows. As part of its long-standing strategy, the Company
has made investments in its technologies which have resulted in enabling
intellectual property and products. It has entered into strategic alliances and
joint ventures with some of the world's leading corporations listed below, which
form the basis of a fundamental restructuring of the Company. Highlights are:

        -   On May 2, 2000, ECD and Texaco announced that Texaco purchased a 20
            percent equity position in the Company for $67.4 million and Texaco
            and ECD intend, as soon as practicable, to enter into joint ventures
            to promote the development and commercialization of Ovonic Solid
            Hydrogen Storage Systems(TM) and Ovonic Regenerative Fuel Cell(TM)
            technology. ECD will provide each venture with a license of ECD's
            intellectual property relating to the respective field and Texaco
            will provide funding to some agreed level.

        -   On September 21, 2000, ECD and Texaco Energy Systems, Inc. (TESI), a
            wholly-owned subsidiary of Texaco, formed Texaco Ovonic Fuel Cell
            Company LLC. TESI will fund initial product and market development
            of approximately $40 million. The primary use of this funding is
            to fund a contract from Texaco Ovonic Fuel Cell to ECD to further
            develop Ovonic Regenerative Fuel Cell(TM) technology, validate
            manufacturing methodologies and produce production-ready prototypes.

        -   In April 2000, ECD and Bekaert entered into a strategic alliance
            whereby Bekaert will invest $84 million in United Solar, which will
            result in a fivefold capacity expansion and a sales and marketing
            expansion program. The capacity expansion resulted in an order from
            Bekaert ECD Solar Systems to ECD for production equipment valued at
            approximately $50 million with an annual capacity of 25 megawatts.


                                      -44-

<PAGE>

        -   A strategic alliance was formed with General Electric, the first
            activity of which resulted in the creation of a joint venture,
            Ovonic Media, LLC, in March 2000. ECD received a $3 million contract
            from Ovonic Media to design, develop, demonstrate and commercialize
            ECD's proprietary continuous web roll-to-roll technology for the
            ultra-high-speed manufacture of optical media products, primarily
            rewritable DVDs.

        -   Ovonyx formed a strategic alliance with Intel in February 2000,
            which entails an investment by Intel in Ovonyx, to commercialize
            ECD's proprietary nonvolatile semiconductor memory technology, OUM.
            OUM memory technology promises to enable significantly faster write
            and erase speeds and higher cycling endurance than conventional
            memory types.  It has been used in rewritable CD and DVD disks and
            may have potential as a replacement for such memory types as FLASH,
            SRAM and DRAM. The alliance with Intel also includes the granting
            of a nonexclusive royalty-bearing license agreement and a joint
            development program utilizing Intel's wafer fabrication facilities.

        -   On April 25, 2000, Ovonic Battery, after having received all
            necessary government approvals, officially started the first in a
            series of NiMH projects in China and, on June 15, 2000, the second
            and third projects were started.  These contracts will provide
            Ovonic Battery with $63.6 million of contract revenue.  These
            projects, first announced in August 1999, with Rare Earth Ovonic
            create joint ventures, of which Ovonic Battery has a 19% interest,
            which provide an important entry for the Company into the vast
            Chinese market.  The agreements contemplate two additional projects
            that, if orders are received, will result in total revenue to Ovonic
            Battery for all projects of more than $100 million.

        These new business agreements have both near-term and long-term impact
on the Company's capital resources. The Texaco, Bekaert, Ovonyx and General
Electric agreements will all result in reduced cash expenditures as the
Company's business partners assume the responsibility for funding operations.

        In the year ended June 30, 2000, the Company entered into a new license
agreement ($1,778,000 in license fees plus future royalties) with Toshiba
Battery for its HEV technology. In addition, Japan Storage, a licensee, notified
the Company that it had reached a certain level of sales of its products and
that the Company had earned an additional license fee of $360,000 pursuant to
certain terms contained in the previous license agreement with Japan Storage.

        During the year ended June 30, 2000, $11,251,000 of cash was used in
operations. The difference between the net loss of $16,656,000 and the net cash
used in operations was principally due to ECD's $1,999,000 share of the losses
in United Solar


                                      -45-

<PAGE>

relating to ECD's investment of cash in United Solar's future growth and the
Company's depreciation expense. As a result of Bekaert's investment in United
Solar, ECD is no longer funding United Solar's operations.  In addition,
$698,000 of machinery and equipment was purchased or constructed, principally
for the Company's battery operations, during this period.

        The Company expects significant revenues and cash flows related to
product development agreements, many of which already exist, that are entered
into by the Company with industry partners and U.S. government agencies to
develop the Company's products and production technology. ECD has been awarded
government contracts with various governmental agencies (DOE, NREL, NIST, etc.)
and with various industry partners.

        During the next 12 months, the Company expects to purchase up to
$500,000 of machinery and equipment.

        The Company has a financing arrangement with Standard Federal Bank, a
member of the ABN AMRO Group, for a $3,000,000 line of credit bearing an
interest rate at prime rate, which expires on June 30, 2001. The Company does
not expect to use any of this available financing during the next 12 months.

        As previously noted, the Company's strategy is to finance its operations
and growth through the formation of strategic alliances to further commercialize
its products. The agreements discussed above will provide significant cash flows
in the future. While the Company is in negotiations with a number of companies
related to its technologies, which will accelerate the commercialization of its
products worldwide and which could provide it with additional revenue under
license and other agreements in the coming year, it is unable to predict the
amount, if any, of such revenue.

        The Company is not aware of events or circumstances that would
significantly alter royalty revenues for the next 12 months.

        Due primarily to the completion of product development agreements with
GM, NIST and Shell Hydrogen, the Company expects the amount of cash to be
received under existing product development agreements in the year ending June
30, 2001 to decrease to approximately $5,700,000, compared to $15,654,000
received from product development agreements in the year ended June 30, 2000.
Certain of the Company's product development and product purchase agreements
contain provisions allowing for the termination of such agreements for failure
of the Company to meet agreement milestones or for breach of material
contractual provisions.  Generally, the termination provisions allow for the
Company to recover any costs incurred through the termination date.




                                      -46-

<PAGE>

        Based on historical trends, the amount of cash from royalties to be
received in the year ending June 30, 2001 is expected to be approximately
$3,900,000 compared to $3,058,000 received in the year ended June 30, 2000. The
amount of royalties we receive each year is dependent on the production volumes
of our licensees, the sales price of their products and, because much of our
royalty revenues are based on the Japanese yen, the effect of yen-to-dollar
currency translations. Licensees may not terminate royalty payments to us
without also terminating the licensee's rights to manufacture products under our
patents. The failure of licensees to pay royalties would constitute a material
breach of the license agreement for which we could terminate the license or seek
damages.

        Since license agreements are continuously being negotiated, fees from
such agreements are difficult to predict. The Company is unable to forecast the
amount of cash to be received from license fees in the year ending June 30,
2001.

        Due to the recent increase in its stock price, the Company has received,
since August 1, 1999, approximately $16.0 million ($1.9 million of which
occurred after June 30, 2000) in proceeds from the exercise of employee stock
options and the exercise of warrants. While there are additional employee stock
options and warrants, which may be exercised, the Company is unable to predict
the amount or the timing of such exercises.

        Management believes that funds generated from operations, new business
agreements and existing cash and cash equivalents will be adequate to support
and finance planned growth, capital expenditures and company-sponsored product
development programs over the coming year. As the Company's joint ventures
expand beyond the initial product and market development stages, the Company may
be required to make additional contributions to the ventures and to fund the
Company's share of the capital required to maintain its percentage interest in
each venture. The Company is exploring many alternatives, including, but not
limited to, debt financing through third parties, debt financing from our joint
venture partners, additional equity partners and investment of additional
intellectual property or proprietary technology in exchange for the Company's
share of funding.

Item 7A:  Quantitative and Qualitative Disclosures about Market Risk
-------   ----------------------------------------------------------

        The following discussion about our exposure to market risk of financial
instruments contains forward-looking statements. Actual results may differ
materially from those described.

        Our holdings of financial instruments are comprised of debt securities
and time deposits. All such instruments are classified as securities available
for sale. We do not invest in portfolio equity securities, or commodities, or
use financial derivatives for trading purposes. Our debt security portfolio
represents funds held temporarily pending use in


                                      -47-

<PAGE>

our business and operations.  The Company had $89,110,000 and $19,026,000 of
these investments on June 30, 2000 and 1999, respectively. On June 30, 2000,
the investments had an average maturity of 314 days, $44,723,500 of which had
maturities of 91 days to 33 months. On June 30, 1999, all maturities were less
than 90 days. It is the Company's policy that investments shall be rated "A" or
higher by Moody's or Standard and Poor's, no single investment shall represent
more than 10% of the portfolio and at least 20% of the total portfolio shall
have maturities of less than 90 days. Our market risk exposure consists of
exposure to changes in interest rates and to the risks of changes in the credit
quality of issuers.  An interest rate change of 1% would result in a change in
the value of our June 30, 2000 portfolio of approximately $695,000.








                                      -48-
<PAGE>


Item 8: Consolidated Financial Statements and Supplementary Data
------  --------------------------------------------------------


                       INDEPENDENT AUDITORS' REPORT


Board of Directors
Energy Conversion Devices, Inc.
Troy, Michigan

We have audited the accompanying consolidated balance sheets of Energy
Conversion Devices, Inc. and subsidiaries (the "Company") as of June 30, 2000
and 1999, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended June 30,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of June 30, 2000 and
1999, and the results of its operations and its cash flows for the three years
in the period ended June 30, 2000 in conformity with accounting principles
generally accepted in the United States of America.



/s/ Deloitte & Touche LLP


Detroit, Michigan
September 28, 2000



                                      -49-

<PAGE>

                        ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                                   CONSOLIDATED BALANCE SHEETS
                                   ---------------------------
                                             ASSETS
                                             ------
<TABLE>
<CAPTION>

                                                                        June 30,
                                                              ----------------------------
                                                                  2000            1999
                                                              ------------    ------------
<S>                                                           <C>             <C>
CURRENT ASSETS (NOTE A)

    Cash, including cash equivalents of
       $44,386,000 at June 30, 2000 and
       $19,026,000 at June 30, 1999                           $ 44,592,017    $ 19,076,983
    Investments                                                 44,723,500          -
    Accounts receivable (net of allowance for
       uncollectible accounts of approximately
       $579,000 at June 30, 2000 and $303,000
       at June 30, 1999)                                         7,172,166       6,315,640
    Amounts due from related parties                             8,893,354       1,404,285
    Inventories                                                    994,077         589,245
    Other                                                          302,413          -
                                                              ------------    ------------
               TOTAL CURRENT ASSETS                            106,677,527      27,386,153

PROPERTY, PLANT AND EQUIPMENT (NOTES A and E)
    Land and land improvements                                     312,588         312,588
    Buildings and improvements                                   3,865,506       3,733,816
    Machinery and other equipment (including construction in
       progress of approximately $578,000 and  $844,000
       at June 30, 2000 and 1999)                               18,808,002      18,353,014
    Capitalized lease equipment                                  4,734,653       4,988,672
                                                              ------------    ------------
                                                                27,720,749      27,388,090
    Less accumulated depreciation
       and amortization                                        (21,459,477)    (19,449,827)
                                                              -------------   -------------
               TOTAL PROPERTY, PLANT AND EQUIPMENT               6,261,272       7,938,263

Investments in EV Global and Innovative Transportation
      Systems (NOTE A)                                           2,639,716       2,239,716
Long-Term Note Receivable - Bekaert ECD Solar Systems (NOTE A)   9,631,495          -
JOINT VENTURES (NOTE D)
    United Solar                                                    -              956,411
    Bekaert ECD Solar Systems                                   22,394,868          -
    GM Ovonic                                                       -               -
      Ovonyx                                                        -               -
      Ovonic Media                                                  -               -
      Rare Earth Ovonic                                             -               -
      Sovlux                                                        -               -

OTHER ASSETS                                                     1,300,764       1,287,455
                                                              ------------    ------------
               TOTAL ASSETS                                   $148,905,642    $ 39,807,998
                                                              ============    ============
</TABLE>
See notes to consolidated financial statements.

                                              -50-
<PAGE>


                        ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                                   CONSOLIDATED BALANCE SHEETS
                                   ---------------------------

                              LIABILITIES AND STOCKHOLDERS' EQUITY
                              ------------------------------------

<TABLE>
<CAPTION>
                                                                            June 30,
                                                                  ----------------------------
                                                                      2000            1999
                                                                  ------------    ------------
<S>                                                               <C>             <C>
 CURRENT LIABILITIES
    Accounts payable and accrued expenses                         $  6,133,826    $  4,706,163
    Accounts payable - related parties                                  17,546             995
    Salaries, wages and amounts withheld
       from employees                                                1,998,684       1,581,447
    Deferred revenues under business
       agreements (NOTE A)                                             161,331       1,349,087
    Deferred revenues - related parties                              6,376,644          -
    Current installments on long-term
       liabilities (NOTE E)                                          2,200,039       1,309,508
                                                                  ------------    ------------
              TOTAL CURRENT LIABILITIES                             16,888,070       8,947,200

LONG-TERM LIABILITIES (NOTE E)                                      10,427,858       2,679,936

LONG-TERM NOTES PAYABLE (NOTE E)                                     9,631,495          -

DEFERRED GAIN                                                          669,072       1,110,132

NONREFUNDABLE ADVANCE ROYALTIES (NOTE C)                             3,938,667       3,882,103
                                                                  ------------    ------------
              TOTAL LIABILITIES                                     41,555,162      16,619,371

NEGATIVE GOODWILL (NOTE D)                                           3,148,426          -

MINORITY INTEREST (NOTE D)                                           5,425,494          -

STOCKHOLDERS' EQUITY
    Capital Stock (NOTES F and G)
       Class A Convertible Common Stock, par value $0.01 per share:
              Authorized - 500,000 shares
              Issued & outstanding - 219,913 shares                      2,199           2,199
       Class B Convertible Common Stock,
         par value $0.01 per share
              Authorized, Issued and Outstanding - 430,000 shares        4,300           4,300

       Common Stock, par value $0.01 per share:
              Authorized - 30,000,000 shares Issued &
              Outstanding -18,098,646 shares at June 30,
              2000 and 12,841,270 shares at June 30, 1999              180,986         128,413
    Additional paid-in capital                                     324,293,312     233,861,099
    Accumulated deficit                                           (222,184,080)   (205,527,952)
    Accumulated other comprehensive income                              50,783          -
    Treasury stock at cost - 109,400 shares at June 30, 1999            -           (1,028,092)
    Unearned Compensation on Class B Convertible
       Common Stock                                                 (3,570,940)     (4,251,340)
                                                                  -------------   -------------
              TOTAL STOCKHOLDERS' EQUITY                            98,776,560      23,188,627
                                                                  -------------   ------------

              TOTAL LIABILITIES & STOCKHOLDERS' EQUITY            $148,905,642    $ 39,807,998
                                                                  ============    ============

</TABLE>

See notes to consolidated financial statements.

                                              -51-

<PAGE>

                        ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF OPERATIONS
                              -------------------------------------
<TABLE>
<CAPTION>

                                                                Year ended June 30,
                                                   ----------------------------------------------
                                                       2000             1999             1998
                                                   ------------     ------------     ------------
<S>                                                <C>              <C>              <C>
REVENUES (NOTES A and B)

   Product sales                                   $  3,271,723     $  2,043,419     $  7,875,550
   Product sales to related parties                   3,620,632        2,480,819        1,982,793
                                                   ------------     ------------     ------------
      Total product sales                             6,892,355        4,524,238        9,858,343
   Royalties                                          3,440,164        2,735,622        2,485,981
   Revenues from product development
      agreements                                      9,660,782       17,126,426       14,317,705
   Revenues from product development
      agreements with related parties                   758,203          114,189            3,711
                                                   ------------     ------------     ------------
         Total revenues from product                 10,418,985       17,240,615       14,321,416
            development agreements
   Revenues from license and other agreements         3,138,000        4,753,995        1,701,134
   Other                                                434,810          340,033          577,234
   Other revenues from related parties                5,654,771        3,377,793        2,613,473
                                                   ------------     ------------     ------------
      Total other revenues                            6,089,581        3,717,826        3,190,707
                                                   ------------     ------------     ------------
          TOTAL REVENUES                             29,979,085       32,972,296       31,557,581

EXPENSES
   Cost of product sales (NOTE A)                     9,924,350        8,136,000       12,673,323
   Cost of revenues from product
      development agreements (NOTE A)                10,373,243       17,361,358       15,605,895
   Product development and research (NOTE A)         15,149,637       11,881,945       11,425,333
   Patents (NOTE A)                                   1,749,575        1,656,496        1,870,024
   Operating, general and administrative              8,717,388        6,930,251        6,827,579
                                                   ------------     ------------      -----------
          TOTAL EXPENSES                             45,914,193       45,966,050       48,402,154
                                                   ------------     ------------      -----------

LOSS FROM OPERATIONS                                (15,935,108)     (12,993,754)     (16,844,573)

OTHER INCOME (EXPENSE):
   Interest income                                    1,576,243        1,186,528          598,940
   Interest expense                                    (574,386)        (563,613)        (137,541)
   Equity loss in joint ventures                     (2,462,978)      (3,659,503)        (384,000)
   Minority interest share of losses                    181,911            -               -
   Gain on sale of Ovonic Battery stock                  -             1,970,000           -
   Loss on Unique Mobility stock                         -              (212,541)          -
   Other nonoperating income - (net)                    558,190          495,294          102,175
                                                   -------------    -------------    ------------
          TOTAL OTHER INCOME (EXPENSE)                 (721,020)        (783,835)         179,574
                                                   -------------    -------------    ------------

      NET LOSS                                     $(16,656,128)    $(13,777,589)    $(16,664,999)
                                                   =============    =============    =============

      BASIC NET LOSS PER SHARE
          (NOTE H)                                 $      (1.16)    $      (1.06)    $      (1.50)
                                                   =============    =============    =============

      DILUTED NET LOSS PER SHARE
          (NOTE H)                                 $      (1.16)    $      (1.06)    $      (1.50)
                                                   =============    =============    =============
</TABLE>
 See notes to consolidated financial statements.

                                              -52-

<PAGE>
<TABLE>
<CAPTION>

                                  ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES F and G)
                           ---------------------------------------------------------------

                                           Three years ended June 30, 2000

             Class A
             Convertible
             Common Stock   Common Stock                                               Treasury Stock
             -------------- -------------------                                        ------------------- Unearned
                                                              Accumu-                                      Compen-
                                                              lated                                        sation on
                                                              Other                                        Class B      Total
             Number         Number              Additional    Compre-                  Number              Convertible  Stock-
             of             of                  Paid-In       hensive   Accumulated    of                  Common       holders'
             Shares  Amount Shares     Amount   Capital       Loss      Deficit        Shares   Amount     Stock        Equity
             ------- ------ ---------- -------- ------------- --------- -------------- -------- ---------- ------------ ------------
<S>          <C>     <C>    <C>        <C>      <C>           <C>       <C>            <C>      <C>        <C>          <C>
Balance at
 July 1,
 1997        219,913 $2,199 10,603,251 $106,033 $202,004,599  $   0     $(175,085,364) (42,000) $(608,808) $    0       $26,418,659

Net loss for
 year ended
 June 30,
 1998                                                                     (16,664,999)                                  (16,664,999)
Issuance of
 stock to
 directors
 and
 consultants                     3,564       36       84,960                                                                 84,996
Public
 offering of
 common stock
 and warrants                1,750,000   17,500   21,704,450                                                             21,721,950
Common stock
 issued in
 connection
 with exercise
 of stock
 options and
 warrants and
 conversion
 of certain
 securities                    135,866    1,358    1,300,382                                                              1,301,740
Common stock
 issued in
 connection
 with con-
 version of CICs                   212        2           (2)                                                                     0
Common stock
 and warrants
 issued to
 EV Global                     146,924    1,469    1,998,531                                                              2,000,000
Unrealized
 loss on
 investment                                                    (47,000)                                                     (47,000)
             ------- ------ ---------- -------- ------------  --------- -------------- -------- ---------- ------------ ------------
Balance at
 June 30,
 1998        219,913 $2,199 12,639,817 $126,398 $227,092,920  $(47,000) $(191,750,363) (42,000) $(608,808) $    0       $34,815,346
             ======= ====== ========== ======== ============  ========= ============== ======== ========== ============ ============

</TABLE>
See notes to consolidated financial statements.


                                             (Continued on next page.)


                                                        -53-
<PAGE>
<TABLE>
<CAPTION>

                                  ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES F and G)
                          ---------------------------------------------------------------

                                           Three years ended June 30, 2000

                                                    (CONTINUED)

            Class A and
            Class B
            Convertible
            Common Stock   Common Stock                                              Treasury Stock
            -------------- -------------------                                       ---------------------- Unearned
                                                            Accumu-                                         Compen-
                                                            lated                                           sation on
                                                            Other                                           Class B     Total
            Number         Number              Additional   Compre-                  Number                 Convertible Stock-
            of             of                  Paid-In      hensive   Accumulated    of                     Common      holders'
            Shares  Amount Shares     Amount   Capital      Loss      Deficit        Shares    Amount       Stock       Equity
            ------- ------ ---------- -------- ------------ --------- -------------- --------- ------------ ----------- ------------
<S>         <C>     <C>    <C>        <C>      <C>          <C>       <C>            <C>       <C>          <C>         <C>
Balance at
 June 30,
 1998       219,913 $2,199 12,639,817 $126,398 $227,092,920 $(47,000) $(191,750,363) ( 42,000) $  (608,808) $    0      $34,815,346

Net loss
 for year
 ended
 June 30,
 1999                                                                   (13,777,589)                                    (13,777,589)
Issuance of
 Class B
 convertible
 common
  stock     430,000  4,300                        4,591,540                                                  (4,591,540)      4,300
Earned
 compen-
 sation on
 Class B
 convertible
 common
 stock                                                                                                          340,200     340,200
Issuance of
 stock to
 directors and
 consultants                    5,000       50       39,950                                                                  40,000
Common stock
 issued in
 connection
 with exercise
 of stock
 options and
 warrants and
 conversion
 of CICs                      161,730    1,617    1,583,045                                                               1,584,662
Common stock
 issued in
 connection
 with Unique
 Europa                        34,723      348      439,602                                                                 439,950
Stock options
 issued to
 non-employees                                      114,042                                                                 114,042
Purchase of
 treasury
 stock                                                                               ( 67,400)    (419,284)                (419,284)
Realized
 loss on
 investment                                                   47,000                                                         47,000
            ------- ------ ---------- -------- ------------ --------- -------------- --------- ------------ ------------ -----------
Balance at
 June 30,
 1999       649,913 $6,499 12,841,270 $128,413 $233,861,099 $   0     $(205,527,952) (109,400) $(1,028,092) $(4,251,340) $23,188,627
            ======= ====== ========== ======== ============ ========= ============== ========= ============ ============ ===========
</TABLE>
See notes to consolidated financial statements.

                                             (Continued on next page.)

                                                        -54-
<PAGE>
<TABLE>
<CAPTION>

                                  ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES F and G)
                          ---------------------------------------------------------------

                                           Three years ended June 30, 2000

                                                    (CONTINUED)
             Class A and
             Class B
             Convertible
             Common Stock   Common Stock                                            Treasury Stock         Unearned
             -------------- -------------------              Accumu-                ---------------------- Compen-
                                                             lated                                         sation on
                                                             Other                                         Class B      Total
             Number         Number              Additional   Compre-                Number                 Convertible  Stock-
             of             of                  Paid-In      hensive Accumulative   of                     Common       holders'
             Shares  Amount Shares     Amount   Capital      Income  Deficit        Shares    Amount       Stock        Equity
             ------- ------ ---------- -------- ------------ ------- -------------- --------- ------------ -----------  ------------
<S>          <C>     <C>    <C>        <C>      <C>          <C>     <C>            <C>       <C>          <C>          <C>
Balance at
 June 30,
 1999        649,913 $6,499 12,841,270 $128,413 $233,861,099 $  0    $(205,527,952) (109,400) $(1,028,092) $(4,251,340) $23,188,627

Net loss
 for year
 ended
 June 30,
 2000                                                                  (16,656,128)                                     (16,656,128)
Earned com-
 pensation
 on Class B
 convertible
 common stock                                                                                                  680,400      680,400
Issuance of
 stock to
 directors and
 consultants                     3,542       35       34,942                                                                 34,977
Common stock
 issued in
 connection
 with exercise
 of stock
 options and
 warrants and
 conversion
 of CICs                       965,434    9,654   11,529,526                                                             11,539,180
Stock options
 issued to
 non-employees                                       146,000                                                                146,000
Purchase of
 treasury stock                                                                      (45,000)    (735,679)                 (735,679)
Warrants sold to
 GE Plastics                                         400,000                                                                400,000
Treasury stock
 sold to Texaco                                                                      154,400    1,763,771                 1,763,771
Common stock
 sold to Texaco              3,588,400   35,884   65,570,745                                                             65,606,629
Stock issued
 to Canon                      700,000    7,000   12,751,000                                                             12,758,000
Unrealized
 gain on
 investments                                                  50,783                                                         50,783
             ------- ------ ---------- -------- ------------ ------- -------------- --------- ------------ ------------ ------------
Balance at
 June 30,
 2000        649,913 $6,499 18,098,646 $180,986 $324,293,312 $50,783 $(222,184,080)     0     $    0       $(3,570,940) $98,776,560
             ======= ====== ========== ======== ============ ======= ============== ========= ============ ============ ===========
</TABLE>

See notes to consolidated financial statements.

                                                        -55-

<PAGE>

                       ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                             -------------------------------------
<TABLE>
<CAPTION>

                                                                              Year ended June 30,
                                                                ---------------------------------------------
                                                                    2000            1999            1998
                                                                -------------   -------------   -------------
<S>                                                             <C>             <C>             <C>
OPERATING ACTIVITIES:
    Net loss                                                    $(16,656,128)   $(13,777,589)   $(16,664,999)
    Adjustments to reconcile net loss to net
       cash used in operating activities:
         Depreciation and amortization                             2,194,989       1,974,726       2,130,494
         Equity interest in United Solar's net loss                1,999,370       3,659,503         384,000
         Equity interest in Ovonic Media's net loss                   67,871           -               -
         Equity interest in Bekaert ECD Solar Systems' net loss      395,737           -               -
         Profit deferred on sales to Bekaert ECD Solar Systems       209,395           -               -
         Gain on sale of Ovonic Battery stock                          -          (1,970,000)          -
         Creditable royalties                                         56,564         (52,017)       (257,366)
         Options issued to executive for services rendered           113,250         453,000         453,000
         Stock issued for services rendered                          861,377         494,242          84,996
         Loss on Unique Mobility Stock                                 -             212,541           -
         Loss on sale of equipment                                     5,051           -               -
         Amortization of deferred gain                              (441,060)       (441,014)       (274,025)
         Negative goodwill--amortization                            (116,608)          -               -
         Minority interest                                          (181,911)          -               -
         Other                                                        62,000           -               -
    Changes in working capital:
         Accounts receivable                                       5,417,811       2,541,141       1,897,567
         Amounts due from related parties                         (7,489,069)       (102,999)        554,593
         Inventories                                                 400,364         484,852         551,968
         Other assets                                                 22,994         382,435        (487,905)
         Accounts payable and accrued expenses                    (3,378,186)        465,934       1,178,977
         Accounts payable - related parties                           16,551         (33,735)       (136,184)
         Deferred revenues under business agreements              (1,187,756)        (67,995)       (254,449)
         Deferred revenues - related parties                       6,376,644           -               -
                                                                -------------   -------------   -------------
NET CASH USED IN OPERATIONS                                      (11,250,750)     (5,776,975)    (10,839,333)
                                                                -------------   -------------   -------------

INVESTING ACTIVITIES:
    Purchases of capital equipment                                  (698,328)     (1,321,562)     (1,701,536)
    Investment in United Solar                                    (1,499,589)     (2,500,000)     (2,499,914)
    Cash acquired in business combination                          7,080,329           -               -
    Investment in Innovative Transportation                         (400,000)          -               -
    Purchase of investments                                      (44,672,717)          -          (3,085,435)
    Sales of investments                                               -               -           4,145,368
    Proceeds from sale of capital equipment                           14,420           -                         -
                                                                -------------   -------------   -------------
NET CASH USED IN INVESTING ACTIVITIES                            (40,175,885)     (3,821,562)     (3,141,517)
                                                                -------------   -------------   -------------

FINANCING ACTIVITIES:
    Redemption (purchase) of treasury stock                         (735,679)       (419,284)          -
    Principal payments under short-term and long-term
       debt obligations and capitalized lease obligations         (1,518,982)     (1,297,272)     (1,604,599)
    Proceeds from capital lease transactions                           -               -           4,530,725
    Proceeds from sale of stock of subsidiary                          -           2,970,000           -
    Net proceeds from sale of stock and warrants                       -               4,300      21,721,950
    Proceeds from sale of stock to Texaco                         67,370,400           -               -
    Proceeds from sale of stock upon exercise of stock
       options and warrants                                       11,425,930       1,131,664         848,741
    Proceeds from issuance of warrants--GE Plastics                  400,000           -               -
    Proceeds from nonrefundable advance royalties                      -             500,000           -
                                                                -------------   -------------   -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                         76,941,669       2,889,408      25,496,817
                                                                -------------   -------------   -------------

NET INCREASE (DECREASE) IN CASH AND
       CASH EQUIVALENTS                                           25,515,034      (6,709,129)     11,515,967

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                  19,076,983      25,786,112      14,270,145
                                                                -------------   -------------   -------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                      $ 44,592,017    $ 19,076,983    $ 25,786,112
                                                                =============   =============   =============
</TABLE>
See notes to consolidated financial statements.


                                              -56-
<PAGE>
<TABLE>
<CAPTION>
                        ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                              -------------------------------------

                                                               Year Ended June 30,
                                                  --------------------------------------------
                                                      2000            1999            1998
                                                  ------------    ------------    ------------
<S>                                               <C>             <C>             <C>
SUPPLEMENTAL DISCLOSURES OF
   CASH FLOW INFORMATION:

   Cash paid for interest                         $   574,386     $   563,613     $   137,541

   The Company's noncash investing and
      financing activities were as follows:

   Investments in EV Global/Unique Mobility             -             439,950       2,000,000

   Issuance of 700,000 shares of ECD
        common stock to Canon in exchange
        for Canon's interest in United Solar       12,758,000           -               -

   Long-term note receivable -
      Bekaert ECD Solar Systems                     9,631,495           -               -

   Long-term note payable - Canon                  (9,631,495)          -               -







</TABLE>








See notes to consolidated financial statements.


                                              -57-

<PAGE>


                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies
---------------------------------------

Nature of Business
------------------

        Energy Conversion Devices, Inc. (ECD) has established a
multidisciplinary business, scientific and technical organization to
commercialize products based on its technologies. Its activities range from
product development to manufacturing and selling products, as well as designing
and building production machinery with an emphasis on alternative energy and
advanced information technologies.

Financial Statement Presentation, Principles of Consolidation and
-----------------------------------------------------------------
Equity Accounting
-----------------

        The consolidated financial statements include the accounts of ECD; its
approximately 91%-owned subsidiary Ovonic Battery Company, Inc. (Ovonic
Battery), a company formed to develop and commercialize ECD's Ovonic NiMH
battery technology; and, effective April 11, 2000, its 81%-owned subsidiary
United Solar Systems Corp. (United Solar) (see Note D) (collectively "the
Company"). The remaining shares of Ovonic Battery are owned by Honda Motor
Company, Ltd. (Honda), Sanoh Industrial Company, Ltd. (Sanoh) and Sanyo. The
remaining shares of United Solar are owned by N.V. Bekaert S.A. and its
U.S.-based subsidiary (Bekaert). No minority interest related to Ovonic Battery
is recorded in the consolidated financial statements because there is no
additional funding requirement by the minority shareholders. See Note D for
discussion of these ventures.

        The Company has a number of strategic alliances and has, as of June 30,
2000, four major investments accounted for by the equity method: (i) Bekaert ECD
Solar Systems LLC (Bekaert ECD Solar Systems), United Solar's 40% joint venture
with Bekaert Corporation, a wholly-owned subsidiary of Bekaert (as more fully
described in Note D), (ii) GM Ovonic (40%), Ovonic Battery's joint venture with
General Motors to manufacture and sell the Company's proprietary NiMH batteries
for electric, hybrid electric and fuel cell electric vehicle applications, (iii)
Ovonyx, Inc. (Ovonyx), a 41.7%-owned joint venture with Mr. Tyler Lowrey, a
recognized authority in semiconductor memory technology and the former vice
chairman and chief technology officer of Micron Technology, Inc., Intel and
other investors, to commercialize ECD's OUM technology, and (iv) Ovonic Media
L.L.C. (Ovonic Media), a joint venture owned 51% by General Electric through its
GE Plastics business unit and 49% by ECD. In addition, ECD has a 50%-owned joint
venture in Russia, Sovlux Co., Ltd. (Sovlux). See Note D for discussion of all
of ECD's ventures.

        Intellectual property and patents resulting from the Company's
investments in its technologies is valued at zero in the balance sheet.
Intellectual property provides the

                                      -58-
<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies - (Continued)
-----------------------------------------------------

foundation for the creation of the important strategic alliances whereby the
Company provides intellectual property and patents and joint venture partners
provide cash.

        The Company's investments in its joint ventures, other than Bekaert ECD
Solar Systems, are recorded at zero. The Company will continue to carry its
investment in each of these joint ventures at zero until the venture becomes
profitable (based upon the venture's history of sustainable profits), at which
time the Company will start to recognize over a period of years its share, if
any, of the then equity of each of the ventures, and will recognize its share of
each venture's profits or losses on the equity method of accounting.

        To the extent that the Company has made cash contributions, it
recognizes its proportionate share of any losses until the investment reaches
zero.

        Based upon the opinion of legal counsel, the Company believes that it
has no obligation to fund any losses that its joint ventures incur beyond the
Company's investment. Additionally, the Company has no financial or other
guarantees with respect to liabilities incurred by its joint ventures.

        Upon consolidation, all intercompany accounts and transactions are
eliminated. Any profits on intercompany transactions are eliminated to the
extent of our ownership percentage.

        Certain items for the years ended June 30, 1999 and 1998 have been
reclassified to be consistent with the classification of items in the year ended
June 30, 2000.

        In preparing financial statements in conformity with generally accepted
accounting principles as practiced in the United States (GAAP), management is
required to make estimates and assumptions that affect the reported amount of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the
reported period. Actual results could differ from those estimates. In addition,
the Company has certain concentrations of revenues as described in Note B. The
Company is impacted by other factors such as the continued receipt of contracts
from the U.S. government and industrial partners, its ability to protect and
maintain the proprietary nature of its technology, its continued product and
technological advances and the strength and ability of the Company's licensees
and joint venture partners to commercialize the Company's products and
technologies.

        In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock

                                      -59-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies - (Continued)
-----------------------------------------------------

Compensation" (FIN 44), which contains rules designed to clarify the application
of APB 25. FIN 44 will be effective on July 1, 2000 and the Company will adopt
it at that time. The Company believes the anticipated impact of adoption of FIN
44 will not be material to the earnings and financial position of the Company.

        In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
(SAB 101), which clarifies certain existing accounting principles for the timing
of revenue recognition and its classification in the financial statements. The
SEC delayed the required implementation date of SAB 101 by issuing Staff
Accounting Bulletins No. 101A, "Amendment: Revenue Recognition in Financial
Statements," and No. 101B, "Second Amendment: Revenue Recognition in Financial
Statements," in March and June 2000, respectively. As a result, the SAB 101 will
not be effective for the Company until the quarter ending June 30, 2001. The
Company believes the adoption of SAB 101 will not be material to the earnings
and financial position of the Company.

        The FASB recently issued Statement No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of Effective Date of FASB
Statement."  The Statement defers for one year the effective date of FASB
Statement No.  133, "Accounting for Derivative Instruments and Hedging
Activities."  The rule now will apply to all fiscal quarters of all fiscal
years beginning after June 15, 2000.  In June 1998, the FASB issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," amended by
SFAS No.  138, "Accounting for Derivative Instruments and Hedging Activities, an
amendment to SFAS No. 133." The Statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. The Statement will require
the Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company expects the adoption of SFAS 133
in fiscal 2001, as well as the effect on subsequent periods, to be immaterial.

Cash Equivalents
----------------

        Cash equivalents consist of investments in short-term, highly liquid
securities having a maturity of three months or less from the date of
acquisition.
                                      -60-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies - (Continued)
-----------------------------------------------------

Investments
-----------

        Investments consist of commercial paper, classified as available for
sale, maturing in 91 days to 33 months from date of acquisition and are stated
at cost, which approximates fair market value.

Investments in EV Global Motors Company (EV Global) and Innovative
------------------------------------------------------------------
Transportation Systems A.G. (Innovative Transportation)
-------------------------------------------------------

        The Company accounts for its investment in EV Global, a nonpublic
company, and Innovative Transportation, a new company comprised of the former
business and assets of Unique Europa GmbH (Unique Europa), on the cost method
basis of accounting.

Financial Instruments
---------------------

        Due to the short-term maturities of cash, cash equivalents, marketable
securities, accounts receivable and accounts payable, the company believes that
the carrying value of its financial instruments to be a reasonable estimate of
fair value.

Translation Gains and Losses
----------------------------

        Since most of the Company's contracts and transactions are denominated
and settled in U.S. dollars, there are no significant foreign currency gains or
losses.

                                      -61-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies - (Continued)
-----------------------------------------------------
<TABLE>
<CAPTION>

Accounts Receivable
-------------------
                                                                           June 30,
                                                                ----------------------------
                                                                    2000            1999
                                                                ------------    ------------
<S>                                                             <C>             <C>
Long-term contracts accounted for under percentage
    of completion accounting
        Revenues recognized but unbilled
           U.S. Government                                      $    -          $  178,645
           Commercial customers                                    201,397         144,470
                                                                -----------     -----------
                                                                   201,397         323,115
        Amounts billed to customers
           Commercial customers                                    638,369         106,050
                                                                -----------     -----------
               Sub-total                                           839,766         429,165

Long-term contracts not accounted for under percentage
  of completion accounting
    Amounts earned which are billed in the subsequent month
        U.S. Government                                            689,217       2,660,628
        Commercial customers                                       154,767          74,800
                                                                -----------     -----------
                                                                   843,984       2,735,428
    Amounts billed
        U.S. Government                                            786,585       1,217,583
        Commercial customers                                         -             153,265
                                                                -----------     -----------
                                                                   786,585       1,370,848
    Retainages
        U.S. Government                                             74,497          62,787
                                                                -----------     -----------
               Sub-total                                         1,705,066       4,169,063

Amounts unbilled for other than long-term contracts
    Commercial customers                                         2,837,375       1,565,313

Amounts billed for other than long-term contracts
    U.S. Government                                                  4,687          16,397
    Commercial customers                                         2,364,272         438,702
                                                                -----------     -----------
               Sub-total                                         2,368,959         455,099

Allowance for uncollectible accounts                              (579,000)       (303,000)

                    TOTAL                                       $7,172,166      $6,315,640
                                                                ===========     ===========
</TABLE>
        Certain contracts with the U.S. government require a retention that is
paid upon completion of audit of the Company's indirect rates. There are no
material retentions at June 30, 2000 and June 30, 1999. Certain U.S. government
contracts remain subject to audit. Management believes that adjustments, if any,
which may result from an audit would not be material to the financial position
or results of operations of the Company.

                                             -62-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies - (Continued)
-----------------------------------------------------

Amounts Due from Related Parties
--------------------------------
<TABLE>
<CAPTION>

                                                                   June 30,
                                                         ----------------------------
                                                             2000            1999
                                                         ------------    ------------
<S>                                                      <C>             <C>
Long-term contracts accounted for under percentage
   of completion accounting
       Revenues recognized but unbilled
          Bekaert ECD Solar Systems                      $  393,426      $    -
          GM Ovonic                                           -             109,900
       Amounts billed
          Bekaert ECD Solar Systems                         939,854           -
                                                         -----------     -----------
                  Sub-total                               1,333,280         109,900

Long-term contracts not accounted for under percentage
   of completion accounting
       Amounts billed
          GM Ovonic                                          22,097           -
                                                         -----------     -----------

Amounts unbilled for other than long-term contracts
   Bekaert ECD Solar Systems                              6,728,194           -
   GM Ovonic                                                 13,087         306,853
   Ovonyx                                                   352,668           -
                                                         -----------     -----------
                  Sub-total                               7,093,949         306,853

Amounts billed for other than long-term contracts
   United Solar                                               -             184,200
   GM Ovonic                                                315,163         803,332
   Ovonyx                                                   128,865           -
                                                         -----------     -----------
                  Sub-total                                 444,028         987,532

                  TOTAL                                  $8,893,354      $1,404,285
                                                         ===========     ===========
</TABLE>

Inventories

        Inventories of raw materials, work in process and finished goods for the
manufacture of electrodes, battery packs and other products, together with
supplies, are valued at the lower of cost (moving average) or market. Cost
elements included in inventory are materials, direct labor and manufacturing
overhead. Cost of sales is removed from inventory based on actual costs of items
shipped to customers.


                                             -63-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies - (Continued)
-----------------------------------------------------

        Inventories (principally those of Ovonic Battery for 1999 and for United
Solar and Ovonic Battery for 2000) are as follows:

                                                 Year Ended June 30,
                                             ---------------------------
                                                  2000          1999
                                               ----------    ----------
           Finished products                   $   37,785    $    1,000
           Work in process                        557,732       286,193
           Raw materials                          398,560       302,052
                                               ----------    ----------
                                               $  994,077    $  589,245
                                               ==========    ==========

Property, Plant and Equipment
-----------------------------

        All properties are recorded at cost. Plant and equipment are depreciated
on the straight-line method over the estimated useful lives of the individual
assets. The estimated lives of the principal classes of assets are as follows:

                                                        Years
                                                     -----------
           Buildings and improvements                  5 to 20
           Machinery and other equipment               3 to 10
           Capitalized lease equipment and
               leasehold improvements                  3 to 5

        Capitalized lease equipment and leasehold improvements are amortized
over the shorter of the term of the lease or the life of the equipment or
improvement, usually three to five years. Accumulated amortization on
capitalized lease equipment as of June 30, 2000 and June 30, 1999 was $2,398,000
and $1,287,000, respectively.

        Costs of machinery and other equipment acquired or constructed for a
particular product development project, which have no alternative future use (in
other product development projects or otherwise), are charged to product
development and research costs as incurred.

        Expenditures for maintenance and repairs are charged to operations.
Expenditures for betterments or major renewals are capitalized and are
depreciated over their estimated useful lives.

                                      -64-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies - (Continued)
-----------------------------------------------------

Long-term Note Receivable
-------------------------

        In connection with Bekaert's investment in United Solar and Bekaert ECD
Solar Systems, Bekaert ECD Solar Systems is required to pay ECD $12,000,000 no
later than January 1, 2004. This noninterest-bearing note receivable was
recorded by ECD at a discounted value of $9,500,000 (using a discount rate of
6.3%). In connection with the acquisition of Canon's interest in United Solar,
ECD is required to pay Canon $12,000,000 no later than January 2004
(see Note E).

Product Development, Patents and Technology
-------------------------------------------

        Product development and research costs are expensed as they are incurred
and, as such, the Company's investments in its technologies and patents are
recorded at zero in its financial statements, regardless of their values. The
technology investments are the bases by which the Company is able to enter into
license and joint venture agreements.

        Total direct product development and research costs, a portion of which
is included in cost of revenues from product development agreements, were
$20,197,000, $22,785,000 and $21,247,000 for the three years ended June 30,
2000, 1999 and 1998, respectively.

Patents
-------

        Patent expenditures are charged directly to expense. Total patent
expenditures were $1,750,000, $1,656,000 and $1,870,000 for the three years
ended June 30, 2000, 1999 and 1998, respectively. Patent defense expenditures,
which are incurred by the Company to protect its patents and to defend or
prosecute claims involving the Company's patents, are charged directly to
expense.

Product Sales
-------------

        Product sales include battery electrodes, revenues related to building
of battery packs, and revenues related to machine-building contracts. In
addition, after April 11, 2000, product sales include photovoltaic products.
Revenues related to machine-building contracts and sales related to other
long-term contracts are recognized on the percentage-of-completion method of
accounting using the costs incurred to date as a percentage of the total
expected costs. All other product sales are recognized when the product is
shipped. These products are shipped FOB shipping point. In certain cases, low
sales volumes, previously related to negative electrodes, combined with high
fixed costs result in losses.

                                      -65-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies - (Continued)
-----------------------------------------------------

Royalties
---------

        Most license agreements provide for the Company to receive royalties
from the sale of products which utilize the licensed technology. Typically, the
royalties are incremental to and distinct from the license fee and are
recognized as revenue upon the sale of the respective licensed product. In
several instances, the Company has received cash payments for nonrefundable
advance royalty payments which are creditable against future royalties under the
licenses. Advance royalty payments are deferred and recognized in revenues as
the creditable sales occur, the underlying agreement expires, or when the
Company has demonstrable evidence that no additional royalties will be
creditable and, accordingly, the earnings process is completed.

        For both ECD and Ovonic Battery royalties, there are royalty trust or
contingent fee arrangements whereby the Company is obligated to pay a trust 25%
of optical memory royalties received and a law firm 25% of Ovonic Battery
royalties received relative to consumer battery licenses entered into in 1995 in
settlement of an International Trade Commission action.

Other Comprehensive Income (Loss)
---------------------------------

        The Company's total comprehensive income (loss) was as follows:
<TABLE>
<CAPTION>
                                                            Year Ended June 30,
                                              ---------------------------------------------
                                                  2000            1999            1998
                                              -------------   -------------   -------------
<S>                                           <C>             <C>             <C>
Net Loss                                      $(16,656,128)   $(13,777,589)   $(16,664,999)
OTHER COMPREHENSIVE INCOME (LOSSES):
Realized (Unrealized) losses on securities          -               47,000         (47,000)
Unrealized gains on securities                      50,783         -                   -
                                              -------------   -------------   -------------
COMPREHENSIVE LOSS                            $(16,605,345)   $(13,730,589)   $(16,711,999)
                                              =============   =============   =============
</TABLE>

Business Agreements
-------------------

        A substantial portion of revenues is derived through business agreements
for the development and/or commercialization of products based upon the
Company's proprietary technologies. The following describes two types of such
agreements.

        The first type of business agreement relates to licensing the Company's
proprietary technology. Licensing activities are tailored to provide each
licensee with the right to use the Company's technology, most of which is
patented, for a specific product application or, in some instances, for further
exploration of new product applications of such technologies. The terms of such
licenses, accordingly, are tailored to address a number of circumstances
relating to the use of such technology which have been negotiated

                                      -66-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies - (Continued)
-----------------------------------------------------

between the Company and the licensee. Such terms generally address
whether the license will be exclusive or nonexclusive, whether the licensee is
limited to very narrowly defined applications or to broader-based product
manufacture or sale of products using such technologies, whether the license
will provide royalties for products sold which employ such licensed technology
and how such royalties will be measured, as well as other factors specific to
each negotiated arrangement. In some cases, licenses relate directly to product
development that the Company has undertaken pursuant to product development
agreements; in other cases, they relate to product development and
commercialization efforts of the licensee; and other agreements combine the
efforts of the Company with those of the licensee.

        License agreement fees are generally recognized as revenue at the time
the agreements are consummated, which is the completion of the earnings process.
Typically, such fees are nonrefundable, do not obligate the Company to incur any
future costs or require future performance by the Company, and are not related
to future production or earnings of the licensee. License fees payable in
installments are recorded at the present value of the amounts to be received,
taking into account the collectibility of the license fee. In some instances, a
portion of such license fees is contingent upon the commencement of production
or other uncertainties. In these cases, license fee revenues are not recognized
until commencement of production or the resolution of uncertainties. Generally,
there are no current or future direct costs associated with license fees.

        In the second type of agreement, product development agreements, the
Company conducts specified product development projects related to one of its
principal technology specializations for an agreed-upon fee. Some of these
projects have stipulated performance criteria and deliverables whereas others
require "best efforts" with no specified performance criteria. Revenues from
product development agreements that contain specific performance criteria are
recognized on a percentage-of-completion basis which matches the contract
revenues to the costs incurred on a project based on the relationship of costs
incurred to estimated total project costs. Revenues from product development
agreements, where there are no specific performance terms, are recognized in
amounts equal to the amounts expended on the programs. Generally, the
agreed-upon fees for product development agreements contemplate reimbursing the
Company for costs considered associated with project activities including
expenses for direct product development and research, patents, operating,
general and administrative expenses and depreciation. Accordingly, expenses
related to product development agreements are recorded as cost of revenues from
product development agreements.

                                      -67-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE A - Summary of Accounting Policies - (Continued)
-----------------------------------------------------

Overhead and General and Administrative Allocations
---------------------------------------------------

        The Company allocates overhead and general and administrative expenses
to product development research expenses and to cost of revenues from research
and development agreements based on a percentage of direct labor costs. For cost
of revenues from product development agreements, this allocation is limited to
the amount of revenues, after direct expenses, under the applicable agreements.
Overhead is allocated to cost of product sales through the application of
overhead to inventory costs.

Other Operating Revenues
------------------------

        Other operating revenues consist principally of revenues related to
services provided to certain related parties and third-party service revenue
realized by certain of the Company's service departments, including the
Production Technology and Machine Building Division and Central Analytical
Laboratory and changes in estimates of revenues recognized on certain customers
and contracts.  Revenues related to services are recognized upon completion of
performance of the applicable service.

Other Nonoperating Income
-------------------------

        Other nonoperating income-net consists of the amortization of deferred
gains and rental income.

Stock Options
-------------

        The Company applies SFAS 123, "Accounting for Stock-Based Compensation,"
for any stock options or awards granted to nonemployees of the Company.  The
amount of compensation cost is determined based upon the fair value of the
options at the grant date and expense is amortized during the period over which
the options vest.  The Company applies APB 25, "Accounting for Stock Issued to
Employees," to its stock-based compensation awards to employees.  These awards
are granted at the fair market value on the grant date in accordance with the
applicable plan.  Accordingly, no compensation expense is recorded in connection
with the Company's stock options granted to employees.


                                      -68-
<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE B - Product Sales, Royalties, Revenues from Product Development Agreements
--------------------------------------------------------------------------------
and License and Other Agreements
--------------------------------

        The Company has product sales and business agreements with related
parties and with third parties for which royalties and revenues are included in
the consolidated statements of operations. A summary of all of the Company's
revenues follows:

<TABLE>
<CAPTION>
                                                               Year Ended June 30,
                                                 ----------------------------------------------
                                                     2000*            1999             1998
                                                 ------------     ------------     ------------
<S>                                              <C>              <C>              <C>
Product sales:
   Machine building                              $  1,745,653     $    330,411     $      -
   Battery packs                                    1,506,715          797,227          378,892
   Negative and positive electrodes                    19,355          915,781        7,496,658
                                                 -------------    -------------    -------------
                                                    3,271,723        2,043,419        7,875,550
Product sales-related parties:
   Photovoltaics                                    2,212,251            -                -
   Machine building                                    78,391           17,952          148,300
   Battery packs                                      (13,418)         262,542           35,577
   Negative and positive electrodes                 1,343,408        2,200,325        1,798,916
                                                 -------------    -------------    -------------
                                                    3,620,632        2,480,819        1,982,793
                                                 -------------    -------------    -------------
Total product sales                              $  6,892,355     $  4,524,238     $  9,858,343
                                                 =============    =============    =============
Royalties
   Battery technology                            $  3,300,547     $  2,681,778     $  2,479,319
   Optical memory                                     139,617           53,844            6,662
                                                 -------------    -------------    -------------
                                                 $  3,440,164     $  2,735,622     $  2,485,981
                                                 =============    =============    =============
Revenues from product development agreements:
   Photovoltaics                                 $  2,185,911     $  2,927,982     $  1,412,080
   Battery technology                               4,727,639       11,488,080       10,583,102
   Optical memory                                   1,029,102        2,472,230        1,288,128
   Hydrogen                                         1,610,632          191,231          490,103
   Other                                              107,498           46,903          544,292
                                                 -------------    -------------    -------------
                                                    9,660,782       17,126,426       14,317,705
Revenues from product development agreements-
related parties
   Battery technology                                 123,733          114,189            3,711
   Optical memory                                     634,470            -                -
   Hydrogen                                             -                -                -
   Fuel cells                                           -                -                -
                                                 -------------    -------------    -------------
                                                      758,203          114,189            3,711
                                                 -------------    -------------    -------------
Total revenues from product development
   agreements                                    $ 10,418,985     $ 17,240,615     $ 14,321,416
                                                 =============    =============    =============
License and other agreements
   Battery technology                            $  3,138,000     $  4,663,995     $  1,701,134
   Optical memory                                    -                  90,000          -
                                                 -------------    -------------    -------------
                                                 $  3,138,000     $  4,753,995     $  1,701,134
                                                 =============    =============    =============

--------
* United Solar is included in ECD's consolidated financial statements effective
April 11, 2000.
</TABLE>


                                             -69-
<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE B - Product Sales, Royalties, Revenues from Product Development Agreements
-------------------------------------------------------------------------------
and License and Other Agreements - (Continued)
----------------------------------------------

        In the year ended June 30, 2000, the Company entered into a new license
agreement ($1,778,000 in license fees plus future royalties) with Toshiba
Battery for its HEV technology. In addition, Japan Storage, a licensee, notified
the Company that it had reached a certain level of sales of its products and
that the Company had earned an additional license fee of $360,000.

        In the year ended June 30, 1999, the Company entered into a patent
license agreement with Sanyo.  Sanyo has been granted a nonexclusive license
under Ovonic Battery patents, which includes the right to sublicense Sanyo
affiliates.  The license agreement provided for an up-front payment of
$4,400,000, which was recognized as license revenue and payment of advance
royalties of $500,000, which was deferred. In addition, ECD and Sanyo also
entered into a stock purchase agreement that provided for the purchase by Sanyo
of a minority interest in Ovonic Battery.  The stock purchase agreement, which
provided for payments totaling $2,970,000, also contained terms which required
the Company to assist Sanyo in negotiating a cooperative venture agreement with
a joint venture of ECD.  The Company recognized a $1,970,000 gain relating to
the sale of stock of Ovonic Battery in the year ended June 30, 1999 under the
terms of the stock purchase agreement and deferred $1,000,000 pending the
negotiation of a cooperative venture agreement.  In the year ended June 30,
2000, the cooperative venture agreement was completed and the $1,000,000 was
recognized as revenues from license and other agreements, as the earnings
process related to this aspect of the transaction was completed.

        The Company historically has entered into agreements with a relatively
small number of major customers throughout the world. There are two major
customers which represent a total of 25% (14% for GM Ovonic and 11% for GM) of
total revenue for the year ended June 30, 2000. There are two major customers
which represent a total of 63% (18% for GM Ovonic and 45% for General Motors)
of total revenue for the year ended June 30, 1999. There are three major
customers which represent a total of 62% of total revenue for the year ended
June 30, 1998 (24% for General Motors, 15% for GM Ovonic and 23% for GP
Batteries International Limited (GP Batteries). All of the Company's major
customers are Ovonic Battery customers.

                                      -70-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE B - Product Sales, Royalties, Revenues from Product Development Agreements
-------------------------------------------------------------------------------
and License and Other Agreements - (Continued)
----------------------------------------------

        The following table presents revenues by country based on the location
of the customer:
                                              Year Ended June 30,
                                 -----------------------------------------
                                     2000           1999           1998
                                 -----------    -----------    -----------

           United States         $21,243,803    $24,879,683    $21,506,018
           Australia                 536,764          -              -
           Germany                   698,211          -              -
           Japan                   5,984,375      6,701,664      2,204,355
           Hong Kong                  81,519        783,822      7,465,908
           The Netherlands           779,336          -              -
           Other countries           655,077        607,127        381,300
                                 -----------    -----------    -----------
                                 $29,979,085    $32,972,296    $31,557,581
                                 ===========    ===========    ===========


NOTE C - Nonrefundable Advance Royalties
----------------------------------------

         At June 30, 2000 and 1999 the Company deferred recognition of revenue
relating to nonrefundable advance royalty payments. Nonrefundable advance
royalties consist of the following:

                                                  June 30,
                                    -----------------------------
                                        2000             1999
                                    ------------     ------------

              Battery               $ 1,913,331      $ 1,792,068
              Optical memory          2,025,336        2,090,035
                                    -----------      -----------
                                    $ 3,938,667      $ 3,882,103
                                    ===========      ===========

        During the years ended June 30, 2000, 1999 and 1998, $165,536, $52,017
and $257,366, respectively, of creditable royalties earned were recognized as
revenue. During the year ended June 30, 2000, a nonrefundable advance royalty of
$100,000 was received from Japan Storage. During the year ended June 30, 1999, a
nonrefundable advance royalty of $500,000 was received from Sanyo. There are no
obligations in connection with any of the advance royalty agreements which
require the Company to incur any additional costs.


                                      -71-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE D - Joint Ventures and Investments
---------------------------------------

Joint Ventures
--------------

United Solar/Bekaert ECD Solar Systems

        Immediately prior to the April 11, 2000 transaction described below,
United Solar Systems Corp. was owned 49.98% by ECD, 49.98% by Canon, and the
remainder by a minority shareholder.  United Solar repurchased the shares of
the minority shareholder, bringing the ownership of United Solar for both ECD
and Canon to 50%.

        On April 11, 2000, ECD and Bekaert entered into a strategic alliance in
the field of photovoltaic (solar) products.  The joint venture entails an
investment by Bekaert in a new manufacturing plant with an annual capacity of
25 megawatts (MW) to be designed and built by ECD, a sales and marketing
expansion program, and the purchase of Canon's interest in United Solar for a
total investment by Bekaert of $84,000,000.

This transaction involved the following:

        -   Bekaert invested $72,000,000 for 1,372,015 newly issued shares of
            United Solar stock and its 60% share of Bekaert ECD Solar Systems
            ($42,000,000 in cash and $30,000,000 in the form of a note, payable
            on an as-needed basis).

        -   Bekaert ECD Solar Systems had paid/is paying to ECD (1) $12,000,000
            in cash (paid at the closing of the transaction) and (2) a note for
            $12,000,000 (to be paid to ECD no later than January 1, 2004).

        -   ECD paid to Canon for all of Canon's shares in United Solar stock
            (1) $12,000,000 in cash, (2) a note, guaranteed by Bekaert, for
            $12,000,000 to be paid to Canon no later than January 1, 2004 and
            (3) 700,000 shares of ECD stock.

        -   United Solar invested $28,000,000 for its 40% interest in Bekaert
            ECD Solar Systems, consisting of (1) $23,056,000 in cash,
            (2) $5,000,000 in the form of a note, payable on an as-needed
            basis, but no later than April 11, 2003, and (3) the stock of
            United Solar Mexico with a negative book value of $56,000.

                                      -72-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE D - Joint Ventures and Investments - (Continued)
-----------------------------------------------------

        As a result of this transaction, United Solar is owned 81% by ECD and
19% by Bekaert.  Bekaert ECD Solar Systems is owned 40% by United Solar and
60% by Bekaert.

        At the closing of this transaction, ECD received a total of $7,000,000
from United Solar and Bekaert ECD Solar Systems.  Of this amount, $5,000,000
was an advance on the 25 MW machine-building order and $2,000,000 was a
repayment by United Solar to ECD of previous loans made by ECD to United Solar.

        Effective April 11, 2001, ECD is consolidating United Solar in ECD's
financial statements.  Prior to the transaction, United Solar's fiscal year
end was December 31.  United Solar's year end has now been changed to June 30
to coincide with ECD's year end.

        ECD valued its acquisition of Canon's interest in United Solar at
$13,214,630, which includes the issuance of 700,000 shares of ECD Common Stock
which was valued at $12,758,000 and $456,630 balance in ECD-United Solar joint
venture account on April 11, 2000. The acquisition, which resulted in ECD's
ownership in United Solar to increase from 49.98% to 81%, has been recorded
under the purchase method of accounting. The Company allocated the purchase
price for this acquisition to the net assets of United Solar. The value of the
net assets acquired exceeded the purchase price resulting in negative goodwill,
which resulted in a reduction of consolidated expenses. The Company allocated
this negative goodwill to reduce United Solar's long-term assets (capital
equipment) and applicable depreciation expense. The remaining negative goodwill
($3,265,000) is being amortized over seven years on a straight-line basis.


                                      -73-
<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE D - Joint Ventures and Investments - (Continued)
-----------------------------------------------------

        The fair value of the assets acquired by ECD was:

             Cash                                           $   7,080,329
             Accounts Receivable                                6,274,337
             Inventory                                            805,196
             Other                                                182,516
             Property, Plant and Equipment (net)                7,425,587
             Investment in Bekaert ECD Solar Systems           23,000,000
             Other                                                156,200
                                                            -------------
                  Total Assets                                 44,924,165

             Accounts Payable                                   5,223,086
             Current Installments of long-term debt             1,445,703
             Long-term notes payable - Canon                    2,500,000
             Long-term Debt                                     6,242,720
                                                            -------------
                  Total Liabilities                            15,411,509
                                                            -------------
           Net assets acquired                                 29,512,656
           Less   - Minority interest (19%)                    (5,607,405)
                  - Write off of fixed assets                  (7,425,587)
                  - Negative goodwill                          (3,265,034)
                                                            --------------
           ECD's investment in United Solar                 $  13,214,630
                                                            ==============

        The table below reflects unaudited pro forma combined results of the
Company and United Solar for the years ended June 30, 2000 and June 30, 1999 as
if this acquisition had taken place at the beginning of fiscal 2000 and fiscal
1999:

                                                   Year Ended June 30,
                                             -------------------------------
                                                 2000              1999
                                             -------------     -------------

        Total Revenues                       $ 39,349,212      $ 44,985,573
        Net Loss                             $(14,058,256)     $(12,117,823)
        Net Loss Per Share                   $       (.98)     $       (.93)

        ECD performed laboratory, shop, patent and research services for the
benefit of United Solar for which ECD billed approximately $149,000, $79,000 and
$315,000 in the nine months ended March 31, 2000 and in the years ended 1999 and
1998, respectively. These amounts are included in other revenues. In addition,
in the nine months ended March 31, 2000 and in the years ended 1999 and 1998,
United Solar billed ECD for

                                      -74-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE D - Joint Ventures and Investments - (Continued)
-----------------------------------------------------

approximately $359,000, $437,000 and $180,000, respectively, for work performed
in accordance with U.S. Government contracts.

        The following sets forth certain financial data regarding Bekaert ECD
Solar Systems that are derived from Bekaert ECD Solar System's financial
statements.

                          BEKAERT ECD SOLAR SYSTEMS
                           STATEMENT OF OPERATIONS
                           -----------------------

                                                        Three Months Ended
                                                          June 30, 2000
                                                        ------------------
                                                           (Unaudited)
        Revenues                                                 -

        Operating Expenses                                       -
           General and administrative                       $ 1,098,371
                                                            ------------
                Total                                         1,098,371
        Other Income                                            109,029
                                                            ------------
        Net Loss                                            $  (989,342)
                                                            ============

                   BEKAERT ECD SOLAR SYSTEMS BALANCE SHEET
                   ---------------------------------------

                                                          June 30, 2000
                                                        ------------------
                                                           (Unaudited)
        Current Assets:
           Cash and Cash Equivalents                        $17,352,523
           Inventory                                          5,035,236
           Other Current Assets                              17,247,084
                                                            -----------
                Total Current Assets                         39,634,843
        Property, Plant and Equipment (Net)                   1,720,921
        Other Assets                                         10,462,695
                                                            -----------
                Total Assets                                $51,818,459
                                                            ===========
        Current Liabilities:
           Accounts Payable and Accrued Expenses            $ 8,120,306
           Note Payable-ECD                                   9,631,495
                                                            -----------
                Total Current Liabilities                    17,751,801
        Total Members' Equity                                34,066,658
                                                            -----------
                Total Liabilities and Members' Equity       $51,818,459
                                                            ===========


                                      -75-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE D - Joint Ventures and Investments - (Continued)
-----------------------------------------------------

        Bekaert ECD Solar Systems was formed on April 11, 2000 and, for the
period from April 11, 2000 through June 30, 2000, the Company recorded revenues
of $76,000 from Bekaert ECD Solar Systems.

GM Ovonic

        In June 1994, Ovonic Battery and General Motors formed a joint venture,
GM Ovonic, for the manufacture and commercialization of Ovonic NiMH batteries
for electric, hybrid electric and fuel cell electric vehicles. General Motors
has a 60% interest and Ovonic Battery has a 40% interest in this joint venture.
Ovonic Battery has contributed intellectual property, licenses, production
processes, know-how, personnel and engineering services pertaining to Ovonic
NiMH battery technology to the joint venture. The contribution of General Motors
consists of operating capital, plant, equipment and management personnel
necessary for the volume production of batteries.

        During the years ended June 30, 2000, 1999 and 1998, the Company had
revenues of $4,233,000, $5,924,000 and $4,871,000, respectively, related to
sales of products to GM Ovonic and revenues for services performed for GM
Ovonic.

        There are no financial statements currently available for GM Ovonic. GM
Ovonic is in its developmental stage and, as such, has a history of operating
losses.

Ovonyx

        In January 1999, ECD and Mr. Tyler Lowrey, the former vice chairman and
chief technology officer of Micron Technology, Inc., formed a strategic alliance
(a corporation was formed on June 23, 1999), Ovonyx (initially owned 50% by ECD
and the balance owned by Mr. Lowrey together with an affiliate of Mr. Lowrey),
to commercialize ECD's Ovonic Unified Memory. In February 2000, Ovonyx formed a
strategic alliance with Intel in which Intel Capital, and other investors, made
an equity investment in Ovonyx. Additionally, Ovonyx granted Intel a
nonexclusive royalty-bearing license and began a joint development program
utilizing one of Intel's wafer fabrication facilities. As a result, ECD
currently owns 41.7% of Ovonyx.

        ECD recorded revenues from Ovonyx of $2,686,000 through June 30, 2000,
representing services performed for its operations which commenced on January
15, 1999. ECD has received payment for $2,205,000 for these services as of June
30, 2000, and the remaining balance is included in accounts receivable.


                                      -76-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE D - Joint Ventures and Investments - (Continued)
-----------------------------------------------------

        The following sets forth certain financial data regarding Ovonyx that
are derived from Ovonyx's financial statements.

                     OVONYX INC. STATEMENT OF OPERATIONS
                     -----------------------------------

                                                          Period from
                                                        June 23, 1999 to
                                                          May 31, 2000
                                                        ----------------

        Revenues                                          $    458,150

        Operating Expenses
           Product development                               2,394,072
           Patent                                              106,871
           General and administrative                          860,622
                                                          ------------
                Total                                        3,361,565
        Other Income                                            83,639
                                                          ------------
        Net Loss                                          $ (2,819,776)
                                                          =============


                           OVONYX INC. BALANCE SHEET
                           -------------------------

                                                           May 31, 2000
                                                        ------------------
        Current Assets:
           Cash and Cash Equivalents                        $ 2,256,875
           Accounts Receivable                                  101,880
           Other Current Assets                                  16,927
                                                            -----------
               Total Current Assets                           2,375,682
        Property, Plant and Equipment (Net)                      11,883
        Other Assets                                              3,000
        Securities available for sale                         4,481,150
                                                            -----------
               Total Assets                                 $ 6,871,715
                                                            ===========
        Current Liabilities:
           Accounts Payable and Accrued Expenses            $   502,232
                                                            -----------
               Total Current Liabilities                        502,232
        Total Stockholders' Equity                            6,369,483
                                                            -----------
               Total Liabilities and Stockholders' Equity   $ 6,871,715
                                                            ===========



                                      -77-
<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE D - Joint Ventures and Investments - (Continued)
-----------------------------------------------------

Investments in EV Global and Innovative Transportation

        In February 1998, the Company and EV Global, a Lee Iacocca company,
entered into a Stock Purchase Agreement (Agreement) which provided for the
transfer to EV Global of 146,924 shares of ECD Common Stock and warrants to
purchase 133,658 shares of ECD Common Stock. The Agreement also provided for the
transfer to ECD of 250,000 shares of EV Global Common Stock and 129,241 shares
of Unique Mobility Common Stock. Pursuant to the terms of the warrant agreement,
EV Global elected to exchange, in March 2000, the warrants for 49,888 shares of
ECD Common Stock. ECD's interest in EV Global is less than 1%.

        In May 1999, ECD, Unique Mobility and EV Global formed the German
private company, Unique Europa, headquartered in Mittweida, near Leipzig, in the
Free State of Saxony, Germany, to manufacture battery-electric, hybrid-electric
and fuel cell-electric vehicles. In October 1999, the business and assets of
Unique Europa were reorganized into a new company, Innovative Transportation.

        Innovative Transportation was initially capitalized with a minor amount
of cash and a contribution of 625,000 shares of Unique Mobility Common Stock. Of
the stock contribution, 208,333 shares (79,092 of which were acquired from EV
Global in exchange for 34,723 shares of ECD) were contributed by ECD. At the
inception of Innovative Transportation, ECD's interest was 5.7%. ECD's interest
increased to 11.7% as a result of an additional investment of $400,000.

        Innovative Transportation is in its formative stage and, as such, there
are no financial statements currently available.

Rare Earth Ovonic

        During the year ended June 30, 2000, ECD signed an agreement with Rare
Earth High-Tech Co. Ltd. (Rare Earth High-Tech) of Baotou Steel Company of Inner
Mongolia, China. The agreement called for the creation of joint ventures for
manufacturing and licensing of advanced NiMH battery technology, hydrogen
storage alloy powders, advance Ovonic nickel hydroxide materials and production
equipment for NiMH batteries. As of June 30, 2000, three of the contemplated
five joint ventures have been started. ECD's subsidiary, Ovonic Battery, will
contribute technology for its 19% interest in each of these joint ventures.

Ovonic Media

        In March 2000, ECD and General Electric formed a strategic alliance, the
first activity of which resulted in the creation of a joint venture, Ovonic
Media, LLC. This joint venture is owned 51% by General Electric through its GE
Plastics business unit and 49% by ECD. ECD has contributed intellectual property
and licenses and will contribute other

                                      -78-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE D - Joint Ventures and Investments - (Continued)
-----------------------------------------------------

assets in the form of tangible personal property to the joint venture. GE will
make cash and other contributions to the joint venture.

        For the year ended June 30, 2000, the Company had revenues of $634,000
from Ovonic Media for providing services.

        The following sets forth certain financial data regarding Ovonic Media
that are derived from Ovonic Media's financial statements.

                     OVONIC MEDIA STATEMENT OF OPERATIONS
                     ------------------------------------

                                                     Four Months Ended
                                                       June 30, 2000
                                                     -----------------
                                                        (Unaudited)

        Revenues                                         $    -
        Operating expenses:
           Product development                              422,479
           General and administrative                       121,681
                                                         -----------
               Total expenses                               544,160
                                                         -----------
        Loss from operations                               (544,160)
           Interest expense                                  (5,004)
                                                         -----------
        Net Loss                                         $ (549,164)
                                                         ===========

                                  OVONIC MEDIA BALANCE SHEET
                                  --------------------------

                                                         June 30, 2000
                                                       -----------------
                                                          (Unaudited)
        Current Assets:
           Advances to ECD                                 $   463,867
                                                           -----------
               Total Current Assets                            463,867
           Property, Plant and Equipment (Net)                 223,015
                                                           -----------
                    Total Assets                           $   686,882
                                                           ===========

        Current Liabilities:
           Current Portion of Equipment Lease              $    65,816
                                                           -----------
               Total Liabilities                                65,816

        Capital Contributions                                1,170,230
        Accumulated Deficit                                   (549,164)
                                                           -----------
               Total Members' Equity                           621,066
                                                           -----------
                    Total Liabilities and Members' Equity  $   686,882
                                                           ===========

                                      -79-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE D - Joint Ventures and Investments - (Continued)
-----------------------------------------------------

Sovlux

        In 1990, ECD formed Sovlux, a joint venture to manufacture the Company's
photovoltaic products in the countries of the former Soviet Union. Sovlux is
owned 50% by ECD and 50% by the State Research and Production Enterprise Kvant
and enterprises of the Russian Ministry of Atomic Energy (Minatom). Sovlux has
not been able to continue production of photovoltaic products due to current
economic conditions in Russia.

        In 1998, ECD formed Sovlux Battery to produce NiMH batteries and
components for sale to Ovonic Battery and its licensees. Sovlux Battery is owned
50% by ECD and 50% by the Chepetsky Mechanical Plant (Chepetsky), an enterprise
of Minatom. ECD's contribution to the ventures consists solely of technology.

        There are no financial statements currently available for Sovlux or
Sovlux Battery. Sovlux and Sovlux Battery are in their developmental stage and,
as such, have a history of operating losses.

        In 1998, the Company recorded revenues of $1,500,000 for license fees
relating to a technology transfer agreement with Sovlux Battery and Chepetsky.

NOTE E - Long-Term Liabilities and Line of Credit
-------------------------------------------------

        A summary of the Company's long-term liabilities is as follows:

                                                             June 30,
                                                    ---------------------------
                                                        2000           1999
                                                    ------------   ------------
Capitalized leases with Finova
  (with interest rates of approximately 12% at
  June 30, 2000 and 12% at June 30, 1999)           $ 2,552,643    $  3,789,416
Capitalized Leases - Fuji
  (interest rate of 6.93%)                            7,458,879           -
Note Payable - Canon (discount rate of 6.3%)          9,631,495           -
Note Payable - Canon (interest rate of 6.21%)         2,500,000           -
Financing Lease for headquarters building
   with interest at 8.2% and monthly payments
   of $19,250                                             -             132,172
Other capitalized leases                                 39,375          52,856
Other                                                    77,000          15,000
                                                    -----------    ------------
Total                                                22,259,392       3,989,444
Less amounts included in current liabilities          2,200,039       1,309,508
                                                    -----------    ------------
Total Long-Term Liabilities                         $20,059,353    $  2,679,936
                                                    ===========    ============


                                      -80-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE E - Long-Term Liabilities and Line of Credit - (Continued)
---------------------------------------------------------------

Capitalized Leases
------------------

        In April 1998, the Company entered into a $6,000,000 capital lease
transaction with Finova Capital Corporation, which has two components. One
component, which has been fully utilized, provided $2,000,000 to refinance
existing leased equipment (resulting in $1,200,000 net cash to the Company) and
has a three-year term at the expiration of which the Company will be required to
purchase the equipment for 10% of the original cost. The second component
provided for up to $4,000,000 of financing through December 31, 1998 for the
Company's sale and leaseback of equipment it acquired subsequent to June 30,
1996. At the expiration of the related five-year lease, the Company will be
required to purchase the leased equipment for 10% of the original cost. At June
30, 1998, the Company had entered into sale-and-leaseback arrangements of
$3,137,000 in connection with the second component. The unused portion of the
second component has expired.

        The lease agreement is secured by Ovonic Battery's plant and equipment.
In addition, ECD has guaranteed Ovonic Battery's obligations under this
agreement and has provided a first security interest in the Company's
unencumbered plant and equipment.

        The Company is obligated under a capital lease with Fuji Bank for
certain machinery and equipment. Under the terms of the agreement, United Solar
will make 43 monthly payments of $120,475 from the period November 21, 1997 to
June 21, 2001, and 42 monthly payments of $174,733 from the period July 21, 2001
until the lease termination date of December 21, 2004, at which time United
Solar can repurchase the assets for the nominal value of $1.00. The lease is
guaranteed by Canon and, as a result, Canon has a lien on United Solar's assets.

Notes Payable and Other Long-Term Liabilities
---------------------------------------------

        In connection with the acquisition of Canon's interest in United Solar,
ECD issued a noninterest- bearing note payable to Canon for $12,000,000 due no
later than January 2004. This note payable was recorded by ECD at a value of
$9,500,000 (at a discount rate of 6.3%). (See Note A - Long-Term Note
Receivable.)

        United Solar entered into a term loan with Canon in the amount of
$2,500,000. Interest accrues at a rate of 6.21% per annum and the loan plus
accrued interest is payable in full on January 17, 2003. At the Company's
option, certain additional rights can be given to Canon under a license
currently in effect in lieu of a cash payment.

                                      -81-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE E - Long-Term Liabilities and Line of Credit - (Continued)
---------------------------------------------------------------

Other
-----

        The Company has operating lease agreements, principally for office and
research facilities and equipment. These leases, in some instances, include
renewal provisions at the option of the Company. Rent expense under such lease
agreements for the years ended June 30, 2000, 1999 and 1998 was approximately
$765,000, $699,000, and $1,361,000, respectively.

        Future minimum payments on long-term notes payable and other long-term
liabilities, obligations under capital leases and noncancellable operating
leases expiring in each of the five years subsequent to June 30, 2000 are as
follows:
<TABLE>
<CAPTION>
                                        Long-Term
                                        Note Payable
                                        and Other
                                        Long-Term Liabilities   Capital Leases   Operating Leases
                                        ---------------------------------------------------
        <S>                             <C>                     <C>              <C>
        2001                                 -                  $ 3,011,796      $ 1,682,743
        2002                                 -                    2,882,606        1,702,684
        2003                            $ 2,500,000               2,810,723        1,697,088
        2004                             12,000,000               2,096,795        1,551,214
        2005                                 -                    1,048,397        1,172,037
        Thereafter                           77,000                   -                -
                                        -----------             -----------      -----------
             TOTAL                      $14,577,000             $11,850,317      $ 7,805,766
                                        ===========             ===========      ===========
             Less interest & taxes
               included above             2,368,506               1,799,419
                                        -----------             -----------
             Present value of minimum
               payments                 $12,208,494             $10,050,898
                                        ===========             ===========
</TABLE>

Line of Credit
--------------

        In April 1999, the Company entered into a two-year financing agreement
with Standard Federal Bank for a line of credit of up to $3,000,000. This
financing bears an interest rate of prime, is secured by a first interest in the
Company's accounts receivable and inventory and contains certain financial
covenants relating to the Company's tangible net worth, working capital and
total debt to tangible net worth. The Company has not borrowed under this
financing agreement.


                                      -82-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE F - Capital Stock
----------------------

        The voting rights of ECD's three classes of stock are as follows:

               Class A Convertible Common Stock - 25 votes per share
               Class B Convertible Common Stock - one vote per share
               Common Stock - one vote per share

        The Class A Convertible Common Stock is automatically convertible into
Common Stock on a share-for-share basis on September 30, 2005 and is convertible
at the option of the holder any time prior to that date.

        As part of an employment agreement among ECD, Ovonic Battery and Mr.
Stanford R. Ovshinsky, president and CEO of ECD, ECD granted Mr. Ovshinsky the
right to vote the shares of Ovonic Battery held by ECD following a change in
control of ECD. For purposes of this agreement, change in control means (i) any
sale, lease, exchange or other transfer of all or substantially all of ECD's
assets, (ii) the approval by ECD stockholders of any plan or proposal of
liquidation or dissolution of ECD, (iii) the consummation of any consolidation
or merger of ECD in which ECD is not the surviving or continuing corporation,
(iv) the acquisition by any person of 30% or more of the combined voting power
of the then- outstanding securities having the right to vote for the election of
directors, (v) changes in the constitution of the majority of the Board of
Directors, (vi) the holders of the Class A Common Stock ceasing to be entitled
to exercise their preferential voting rights other than as provided in ECD's
charter and (vii) bankruptcy. In the event of mental or physical disability or
death of Mr. Ovshinsky, the foregoing power of attorney and proxy shall be
exercised by Mr. Ovshinsky's wife, Dr. Iris Ovshinsky, a vice president of ECD.
In February 1999, the Board of Directors of the Company renewed each of Mr.
Ovshinsky's employment agreements for an additional term ending September 30,
2005.

        As part of an Executive Employment Agreement between ECD and Mr. Robert
C. Stempel, chairman and executive director of ECD, dated January 15, 1999 (the
"Employment Agreement"), ECD issued to Mr. Stempel 430,000 shares of its Common
Stock ($.01 par value), having a total value of $4,595,840 based upon the
closing price of ECD common stock on January 15, 1999, for $4,300, representing
an amount equal to the aggregate par value of the Common Stock. The Restricted
Stock Agreement entered into between the Company and Mr. Stempel states that the
stock fully vests to Mr. Stempel on September 30, 2005, 81 months after the date
of the agreement. The Company is amortizing the total value of the stock grant
on a straight-line basis, and recorded compensation expense of $680,400 in the
year ended June 30, 2000 in

                                      -83-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE F - Capital Stock - (Continued)
------------------------------------

connection with this transaction. Following stockholder approval on March 25,
1999 authorizing 430,000 shares of a new class B Common Stock (Class B Common
Stock), par value $.01, Mr. Stempel surrendered to ECD the shares of Common
Stock issued for an equal number of shares of Class B Common Stock. After the
conversion of the Class A Common Stock into Common Stock, the Class B Common
Stock will be entitled to 25 votes per share.

        The Class B Common Stock is automatically convertible into Common Stock
on a share-for-share basis on September 30, 2005.

        During the years ended June 30, 2000, 1999 and 1998, ECD issued 3,542,
5,000, and 3,564 shares of restricted common stock, respectively, as
compensation to employees, consultants, contractors and directors. ECD recorded
compensation expense, based upon fair market value of these shares at the date
of issuance, for the years ended June 30, 2000, 1999 and 1998 of $35,000,
$40,000 and $45,000, respectively, relating to these restricted shares of Common
Stock.







                                      -84-
<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE G - Stock Option Plans, Warrants and Other Rights to Purchase Stock
------------------------------------------------------------------------

        The Company has Common Stock reserved for issuance as follows:
<TABLE>
<CAPTION>
                                                                      Number of Shares
                                                               ------------------------------
                                                               June 30, 2000    June 30, 1999
                                                               -------------    -------------

<S>                                                            <C>              <C>
Conversion of Class A Convertible Common Stock                     219,913          219,913
Conversion of Class B Convertible Common Stock                     430,000          430,000
Stock options                                                    2,587,247        3,327,590
1999 Private Placement Warrants                                    120,000          165,307
Warrants issued in connection with services rendered               285,000          285,000
Warrants issued to EV Global                                         -              133,658
Warrants issued to General Electric                                400,000            -
Warrants issued in connection with public offering of units      1,750,000        1,750,000
Convertible Investment Certificates                                  5,745            5,773
                                                                 ---------        ---------
     TOTAL RESERVED SHARES                                       5,797,905        6,317,241
                                                                 =========        =========
</TABLE>
Stock Option Plans
------------------

        The Company's 1976 Amended and Restated Stock Option Plan (the "Amended
Plan") which expired in November 1996, the 1987 Stock Option and Incentive Plan
(1987 Stock Option Plan), which expired in December 1997, and the 1995
Non-Qualified Stock Option Plan (1995 Stock Option Plan) authorize the granting
of stock options at such exercise prices and to such employees, consultants and
other persons as the Compensation Committee appointed by the Board of Directors
(the "Compensation Committee") shall determine. All three stock option plans
are administered by the Compensation Committee.

        Options under the Amended Plan and the 1987 Stock Option Plan expire six
years from the date of grant. Options under the 1995 Stock Option Plan expire no
later than 10 years from the date of grant. Stock options under all three plans
may not be exercised during the first six months of the grant. Thereafter,
options may be exercised cumulatively each year, starting at the end of six
months after grant of the option, at a predetermined rate of the number of
shares of the Common Stock subject to the option. The exercise price of all
options granted has been equal to the fair market value of the Common Stock at
the time of grant.



                                      -85-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE G - Stock Option Plans, Warrants and Other Rights to Purchase Stock -
--------------------------------------------------------------------------
(Continued)
-----------

        The purchase price and number of shares covered by the options are
subject to adjustment under certain circumstances to protect the optionholders
against dilution.

        A summary of the transactions during the years ended June 30, 2000, 1999
and 1998 with respect to the Company's Amended Plan, 1987 Stock Option Plan and
1995 Stock Option Plan follows:
<TABLE>
<CAPTION>

                                2000                     1999                     1998
                       ----------------------   ----------------------   ----------------------
                                   Weighted                  Weighted              Weighted
                                   Average                   Average               Average
                                   Exercise                  Exercise              Exercise
                       Shares      Price        Shares       Price       Shares    Price
                       ---------------------    ----------------------   -------------------
<S>                    <C>         <C>          <C>          <C>         <C>         <C>
Outstanding July 1     2,254,693   $13.17       2,269,413    $12.97      2,327,606   $12.82
Granted                    5,000   $19.00         185,000    $10.19         19,453   $15.71
Exercised                798,468   $12.59         161,482    $ 7.01         61,866   $ 7.73
Cancelled                  7,360   $13.61          38,238    $12.93         15,780   $15.10
                       ---------   ------       ---------    ------      ---------   ------
Outstanding June 30    1,453,865   $13.50       2,254,693    $13.17      2,269,413   $12.97
                       =========   ======       =========    ======      =========   ======
Exercisable June 30    1,339,065   $13.75       2,060,993    $13.44      2,135,933   $12.76
                       =========   ======       =========    ------      =========   ======

</TABLE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE G - Stock Option Plans, Warrants and Other Rights to Purchase Stock -
--------------------------------------------------------------------------
(Continued)
-----------

        The following table summarizes information about stock options
outstanding at June 30, 2000:

<TABLE>
<CAPTION>
                                OPTIONS OUTSTANDING                     OPTIONS EXERCISABLE
                    --------------------------------------------      -----------------------
                                       Weighted         Weighted                     Weighted
                       Number          Average          Average          Number      Average
Range of             Outstanding       Remaining        Exercise       Exercisable   Exercise
Exercise Prices     As of 6/30/00   Contractual Life     Price        As of 6/30/00  Price
----------------    -------------   ----------------   ---------      -------------  ---------
<S>                 <C>             <C>                <C>            <C>            <C>
$10.19 - $11.75        253,070            5.34           $10.80           143,270      $11.27
$11.88 - $11.88        686,285            4.65           $11.88           686,285      $11.88
$15.13 - $15.88        297,340            5.54           $15.56           297,340      $15.56
$16.75 - $23.50        217,170            5.42           $18.96           212,170      $18.97
                     ----------         --------         ------        ----------      ------
$10.19 - $23.50      1,453,865            5.07           $13.50         1,339,065      $13.75
</TABLE>

         In November 1993, stock options to purchase 94,367 shares of Common
Stock held by Stanford R. Ovshinsky, and stock options to purchase 49,630 shares
of Common


                                      86-
<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE G - Stock Option Plans, Warrants and Other Rights to Purchase Stock -
--------------------------------------------------------------------------
(Continued)
-----------

Stock held by Dr. Iris M. Ovshinsky, issued under the aforementioned
Amended Plan, were cancelled and new stock options, covering 150,000 (adjusted
to 366,230 as of June 30, 2000) shares of Common Stock in the case of Mr.
Ovshinsky and 100,000 shares (adjusted to 243,902 as of June 30, 2000) of Common
Stock in the case of Dr. Ovshinsky, were granted by ECD. The stock options
cancelled had an average exercise price of approximately $18.00 per share. The
weighted average exercise price of the outstanding stock options is $12.68 per
share. The number of stock options are adjusted pursuant to the antidilution
provisions of the stock option grants.  The weighted average price was arrived
at based upon (i) the option price of $7.00 per share for the original number of
shares and any additional shares as adjusted for the antidilution provisions
during the 18- month period following the grant; and (ii) thereafter, the fair
market value of any additional shares as adjusted for the antidilution
provisions, determined quarterly.

         On January 15, 1999, ECD entered into a Stock Option Agreement with
Robert C. Stempel that granted Mr. Stempel an option to purchase up to 300,000
shares of Common Stock at an exercise price of $10.688 per share, the fair
market value of the Common Stock as of the date of the Stock Option Agreement.
The option, which is not subject to vesting requirements, may be exercised from
time to time, in whole or in part, commencing as of the date of the Stock Option
Agreement and ending on the tenth anniversary of such date.

        The Company continues to apply APB 25 to its stock-based compensation
awards to employees. Had compensation cost for the Company's stock option plans
been determined based upon the fair value at the grant date for awards under
these plans consistent with the methodology prescribed under SFAS 123, the
Company's net loss and loss per share for the years ended June 30, 2000, 1999
and 1998 would have been increased by approximately $2,133,000, $1,972,000 and
$1,268,000 and $.15, $.15 and $.11 per share, respectively. The fair value of
the options granted during 2000, 1999 and 1998 is estimated as $1,849,000,
$2,139,000 and $349,000 on the date of grant using the Black-Scholes
option-pricing model with the following assumptions:

                                           2000         1999         1998
                                        ----------   ----------   ----------
    Dividend Yield                              0%           0%           0%
        Volatility%                         77.96%       70.27%       59.77%
        Risk Free Interest Rate              6.19%        4.87%        5.74%
        Expected Life                   4.31 years   4.08 years   3.91 years


                                      -87-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE G - Stock Option Plans, Warrants and Other Rights to Purchase Stock -
--------------------------------------------------------------------------
(Continued)
-----------

Warrants
--------

        As of June 30, 2000, ECD had outstanding warrants for the purchase of
120,000 shares of Common Stock in connection with private placements of Common
Stock as well as warrants to purchase 215,000 shares of Common Stock in
connection with services rendered. The warrants are currently exercisable at a
weighted average price of $12.87 per share. The exercise price of certain of the
warrants may be reduced in the future pursuant to certain antidilution
provisions.

        ECD also has outstanding warrants for the purchase of 400,000 shares of
Common Stock granted to General Electric pursuant to a Common Stock Warrant
between GE and ECD entered into in March 2000. These warrants are exercisable on
or prior to March 10, 2010 at $22.93 per share.

        In connection with the 1998 limited public offering of units, ECD has
outstanding warrants for the purchase of 1,750,000 shares of Common Stock. These
warrants, which trade on the NASDAQ National Market under the symbol ENERW, are
exercisable at $20.54 at any time on or prior to July 31, 2001, the expiration
date of the warrants.

        Pursuant to the Stock Purchase Agreement between ECD and Texaco Inc.
dated as of May 1, 2000, Texaco purchased a 20% equity stake in ECD for $67.4
million. As part of this Stock Purchase Agreement, Texaco has rights to purchase
additional shares of ECD Common Stock or other ECD securities (ECD Stock).

Other Rights to Purchase Stock
------------------------------

        So long as Texaco owns more than 5% of ECD Stock and in the event ECD
issues additional ECD Stock other than to Texaco, Texaco has the right to
purchase additional ECD Stock in order for Texaco to maintain its same
proportionate interest in ECD Stock as Texaco held prior to the issuance of the
additional ECD Stock. If Texaco elects to purchase ECD Common Stock, the
purchase price shall be the average of the closing price on NASDAQ of the ECD
Common Stock as reported in The Wall Street Journal for the five trading days
prior to the closing date of the sale multiplied by the number of shares of the
ECD Common Stock which Texaco is entitled to purchase.



                                      -88-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE G - Stock Option Plans, Warrants and Other Rights to Purchase Stock -
--------------------------------------------------------------------------
(Continued)
-----------

        If Texaco does not exercise its right to purchase additional ECD Stock
within 15 days after delivery of a Rights Notice from ECD, Texaco's right to
purchase such additional ECD Stock which are the subject of the Rights Notice
shall terminate.

NOTE H - Net Loss Per Share
---------------------------

        Basic net loss per common share is computed by dividing the net loss by
the weighted average number of common shares outstanding. The Company used the
treasury stock method to calculate diluted earnings per share. Potential
dilution exists from stock options and warrants. Weighted average number of
shares outstanding and basic and diluted earnings per share for the three years
ended June 30 are computed as follows:
<TABLE>
<CAPTION>
                                                2000             1999             1998
                                           --------------   --------------   --------------
<S>                                        <C>              <C>              <C>
Weighted average number of
    shares outstanding                        14,327,869       13,019,657       11,116,619

Net loss                                    $(16,656,128)    $(13,777,589)    $(16,664,999)

BASIC NET LOSS PER SHARE                    $      (1.16)    $      (1.06)    $      (1.50)
                                            =============    =============    =============

Weighted average number of
    shares outstanding                        14,327,869       13,019,657       11,116,619
Weighted average shares for
    dilutive securities                          -0-              -0-              -0-
                                            -------------    -------------    -------------

Average number of shares outstanding
    and potential dilutive shares             14,327,869       13,019,657       11,116,619

Net loss                                    $(16,656,128)    $(13,777,589)    $(16,664,999)

DILUTED NET LOSS PER SHARE                  $      (1.16)    $      (1.06)    $      (1.50)
                                            =============    =============    =============

</TABLE>



                                      -89-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE H - Net Loss Per Share - (Continued)
-----------------------------------------

        Due to the Company's net losses, the 2000, 1999 and 1998 weighted
average shares of potential dilutive securities of 721,513, 101,898 and 450,639,
respectively, were excluded from the calculations of diluted loss per share, as
inclusion of these securities would have been antidilutive to the net loss per
share. Additional securities of 332,817, 3,840,852 and 2,014,649, respectively,
were excluded from the 2000, 1999 and 1998 calculations of weighted average
shares of potential dilutive securities. Because of the relationship between the
exercise prices and the average market price of ECD's Common Stock during these
periods, these securities would have been antidilutive regardless of the
Company's net loss.

NOTE I - Federal Taxes on Income
--------------------------------

        At June 30, 2000 and 1999, the Company has approximately $70,704,000 and
$43,316,000, respectively, of net deferred tax assets, consisting primarily of
$70,190,000 and $42,304,000, respectively, due to net operating loss
carryforwards, and $514,000 and $1,012,000, respectively, due to tax credit
carryforwards. However, a valuation reserve of the same amount is required due
to the Company's operating history and uncertainty regarding the future
realizability of the net tax operating loss carryforwards and tax credit
carryforwards.

        The Company's valuation reserve was increased by $27,388,000 in 2000,
$381,000 in 1999 and by $2,712,000 in 1998 for the impact of the 2000, 1999 and
1998 net operating losses, temporary differences and the expiration of tax
carryforwards. The increase in 2000 is mainly the result of consolidating United
Solar's net operating losses. The Company's utilization of United Solar's net
operating losses is limited to approximately $10 million per year under the
Internal Revenue code.


                                      -90-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE I - Federal Taxes on Income - (Continued)
----------------------------------------------

        At June 30, 2000, the Company's remaining net tax operating loss
carryforwards and tax credit carryforwards expire as follows:

                          Net Tax Operating    Investment Tax     R&D Credit
                          Loss Carryforward     Credit Total     Carryforward

             2001            $23,828,000          $27,000              -
             2002             15,900,000             -                 -
             2003             17,460,000             -                 -
             2004              1,338,000             -                 -
             2005              2,907,000             -                 -
             2006             12,382,000             -                 -
             2007             10,430,000             -             $276,000
             2008              9,496,000             -               41,000
             2009             11,804,000             -               30,000
             2010              7,619,000             -               15,000
             2011             14,743,000             -               40,000
             2012             17,173,000             -               14,000
             2013             22,819,000             -               29,000
             2014             14,044,000             -               42,000
             2015                 -                  -                 -
             2016                 -                  -                 -
             2017                 -                  -                 -
             2018                 -                  -                 -
             2019                 -                  -                 -
             2020             24,501,000             -                 -
                             ------------        ---------        -----------
                             $206,444,000         $27,000          $487,000
                             ============        =========        ===========

NOTE J - Related Party Transactions
-----------------------------------

        For the three years ended June 30, 2000, 1999 and 1998, ECD incurred
expenses of $470,824, $63,331 and $107,881, respectively, for services rendered
by its directors.

        For related party transactions involving United Solar, GM Ovonic and
Sovlux see Note D.


                                      -91-

<PAGE>
                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE K - Business Segments
--------------------------

        The Company has three business segments: its subsidiaries, Ovonic
Battery and United Solar, and the parent company, ECD. Ovonic Battery is
primarily involved in developing and commercializing battery technology. United
Solar is primarily involved in selling, developing and commercializing
photovoltaic technology. ECD is primarily involved in photovoltaics,
microelectronics, fuel cells, hydrogen storage technologies and machine
building. Some general corporate expenses have been allocated to Ovonic Battery.

        The Company's operations by business segment were as follows:

                                     Financial Data by Business Segment
                                     ----------------------------------
                                              (in thousands)
<TABLE>
<CAPTION>

                                                                                   Consolidating
                                   Ovonic Battery  United Solar*        ECD           Entries       Consolidated
                                   --------------  --------------  --------------  --------------  --------------
<S>                                <C>             <C>             <C>             <C>             <C>
Revenues**
    Year ended June 30, 2000          $16,365         $3,763          $11,213         $(1,362)        $29,979
    Year ended June 30, 1999           25,687           -               7,285            -             32,972
    Year ended June 30, 1998           27,161           -               4,397            -             31,558

Interest Income
    Year ended June 30, 2000             -               $50           $1,526            -             $1,576
    Year ended June 30, 1999             -              -               1,187            -              1,187
    Year ended June 30, 1998               11           -                 588            -                599

Interest Expense***
    Year ended June 30, 2000             $385           $174              $15            -               $574
    Year ended June 30, 1999              525           -                  39            -                564
    Year ended June 30, 1998               62           -                  76            -                138

Operating Loss
    Year ended June 30, 2000         $(10,583)         $(497)         $(5,199)           $344        $(15,935)
    Year ended June 30, 1999           (6,587)         -               (6,407)           -            (12,994)
    Year ended June 30, 1998          (11,051)         -               (5,794)           -            (16,845)

</TABLE>


                                              -92-

<PAGE>

                 ENERGY CONVERSION DEVICES, INC. and SUBSIDIARIES

                    Notes to Consolidated Financial Statements

NOTE K - Business Segments - (Continued)
----------------------------------------

<TABLE>
<CAPTION>
                                                                                 Consolidating
                                  Ovonic Battery  United Solar*        ECD           Entries       Consolidated
                                  --------------  --------------  --------------  --------------  --------------
<S>                                <C>             <C>             <C>             <C>             <C>
Equity in Net Loss of Investee
  Under Equity Method
    Year ended June 30, 2000             -             $(396)         $(2,067)           -            $(2,463)
    Year ended June 30, 1999             -              -              (3,660)           -             (3,660)
    Year ended June 30, 1998             -              -                (384)           -               (384)

Depreciation Expense
    Year ended June 30, 2000           $1,486           $424             $708           $(424)         $2,194
    Year ended June 30, 1999            1,247           -                 728            -              1,975
    Year ended June 30, 1998            1,307           -                 823            -              2,130

Capital Expenditures
    Year ended June 30, 2000             $335            $98             $265            -               $698
    Year ended June 30, 1999              800           -                 522            -              1,322
    Year ended June 30, 1998            1,357           -                 345            -              1,702


Investments in Equity Method Investees
    Year ended June 30, 2000             -           $22,395              -              -            $22,395
    Year ended June 30, 1999             -              -                $956            -                956
    Year ended June 30, 1998             -              -               2,116            -              2,116

Identifiable Assets
    Year ended June 30, 2000           $8,930        $41,763         $121,225        $(23,012)       $148,906
    Year ended June 30, 1999           13,012           -              26,796            -             39,808
    Year ended June 30, 1998           16,340           -              35,021            -             51,361


--------------------------------------------

   * For the period from April 11, 2000 to June 30, 2000.
  ** All revenues are derived from external customers.
 *** Excludes intercompany interest.
</TABLE>

                                              -93-

<PAGE>

Item 9:   Changes in and Disagreements on Accounting and Financial Disclosure
------    -------------------------------------------------------------------
          Not applicable.
          ---------------




                                      -94-

<PAGE>
                                   PART III

Item 10: Directors and Executive Officers of the Registrant
-------  --------------------------------------------------

        The ECD directors are elected by the stockholders to serve until the
next annual meeting of stockholders and until their successors are duly elected
and qualified. The composition of the Board of Directors of ECD is as follows:

<TABLE>
<CAPTION>

                            Director
                             of the
                             Company                                   Principal Occupation and
          Name                Since           Office                      Business Experience
          ----                -----           ------                      -------------------

<S>                           <C>       <C>                   <C>
Stanford R. Ovshinsky         1960      President, Chief      Mr. Ovshinsky, 77, the founder and Chief Executive
                                        Executive Officer     Officer of ECD, has been an executive officer and
                                        and Director          officer of ECD since its inception in 1960.  Mr.
                                                              Ovshinsky is the primary inventor of ECD's
                                                              technology. He also serves as the Chief Executive
                                                              Officer and a director of Ovonic Battery; Chief
                                                              Executive Officer and Chairman of United Solar; a
                                                              member of the Management Committee of Texaco
                                                              Ovonic Fuel Cell Company, LLC; a member of the
                                                              Management Committee of Bekaert ECD Solar
                                                              Systems; a member of the Board of Managers of GM
                                                              Ovonic; Chairman of Ovonyx, a member of the Alliance
                                                              Board of Ovonic Media; and Co-Chairman of the Board
                                                              of Directors of Sovlux.  Mr. Ovshinsky is the husband
                                                              of Dr. Iris M. Ovshinsky.


Iris M. Ovshinsky             1960      Vice President        Dr. Ovshinsky, 73, co-founder and Vice President of
                                        and Director          ECD, has been an executive officer and director of
                                                              ECD since its inception in 1960.  Dr. Ovshinsky also
                                                              serves as a director of Ovonic Battery.  Dr. Ovshinsky
                                                              is the wife of Stanford R. Ovshinsky.

Robert C. Stempel             1995      Chairman of the       Mr. Stempel, 67, is Chairman of the Board and
                                        Board and             Executive Director of ECD.  Prior to his election as a
                                        Executive             director in December 1995, Mr. Stempel  served as
                                        Director              senior business and technical advisor to Mr.
                                                              Ovshinsky. He is also the Chairman of Ovonic Battery; a
                                                              member of the Board of Managers of GM Ovonic; a director
                                                              of United Solar and Ovonyx; a member of the Management
                                                              Committee of Texaco Ovonic Fuel Cell Company, LLC; a member
                                                              of the Management Committee of Bekaert ECD Solar Systems
                                                              and a member of the Alliance Board of Ovonic Media. From
                                                              1990 until his retirement in 1992, he was the Chairman
                                                              and Chief Executive Officer of General Motors Corporation.
                                                              Prior to serving as Chairman, he had been President since
                                                              1987.  Mr. Stempel serves on the Audit Committee of the
                                                              Board. He is a director of Southwall Technologies, Inc.


                                             -95-

<PAGE>


Nancy M. Bacon                1977      Senior Vice           Mrs. Bacon, 54, joined ECD in 1976 as its Vice
                                        President and         President of Finance and Treasurer.  She  became the
                                        Director              Senior Vice President of ECD in 1993.  Mrs. Bacon
                                                              also serves as a director of Sovlux and United Solar and
                                                              is a member of the Management Committee of Bekaert ECD
                                                              Solar Systems.

Umberto Colombo               1995      Director              Prof. Colombo, 72, is Chairman of the Scientific
                                                              Councils of the ENI Enrico Mattei Foundation and of
                                                              the Instituto Per l'Ambiente in Italy.  He was Chairman
                                                              of the Italian National Agency for New Technology,
                                                              Energy and the Environment until 1993 and then
                                                              served as Minister of Universities and Scientific and
                                                              Technological Research in the Italian Government until
                                                              1994.  Prof. Colombo is a member of the Board of
                                                              Directors of several Italian-based public companies.
                                                              He is also active as a consultant in international
                                                              science and technology policy institutions related to
                                                              economic growth.

Subhash K. Dhar               1999      Director              Mr. Dhar, 49, joined ECD in 1981 and has held various
                                                              positions with Ovonic Battery since its inception in
                                                              October 1982.  Mr. Dhar is currently the President,
                                                              Chief Operating Officer and a director of Ovonic
                                                              Battery.

Hellmut Fritzsche             1969      Vice President        Dr. Fritzsche, 73, was a professor of Physics at the
                                        and Director          University of Chicago from 1957 until his retirement in
                                                              1996.  He was also Chairman of the Department of
                                                              Physics, the University of Chicago, until 1986.  Dr.
                                                              Fritzsche has been a Vice President of ECD since
                                                              1965, acting on a part-time basis, chiefly in ECD's
                                                              research and product development activities.  He
                                                              serves on the Board of Directors of United Solar.

Joichi Ito(1)                 1995      Director              Mr. Ito, 34, is the Chairman and a Director of Digital
                                                              Garage, K.K. and Infoseek Japan K.K.  He is also the
                                                              President of Neoteny and Transoceanic Ventures, Inc.,
                                                              as well as a board member of PSINet Japan, K.K.  He
                                                              is an expert on new computer technology and
                                                              networked information systems and writes and lectures
                                                              extensively in the United States, Japan and Europe.
                                                              Mr. Ito serves as a director and consultant to many
                                                              companies in the field of information technology.

Seymour Liebman               1997      Director              Mr. Liebman, 51, currently Executive Vice President
                                                              and General Counsel at Canon U.S.A., Inc., has held
                                                              a variety of positions with Canon since 1974, including
                                                              Senior Vice President and General Counsel from 1992-
                                                              1996.  Mr. Liebman also serves on the Board of
                                                              Directors of United Solar.  He is a director of Zygo
                                                              Corporation.


                                             -96-

<PAGE>


Tyler Lowrey                  1999      Director              Mr. Lowrey, 47, currently the President, Chief
                                                              Executive Officer and director of Ovonyx, held a variety
                                                              of positions with Micron Technology Inc. from 1984-
                                                              1997, including Vice Chairman, Chief Technology
                                                              Officer, Chief Operating Officer and Vice President,
                                                              R&D.  While at Micron, Mr. Lowrey was responsible for
                                                              DRAM, SRAM, Flash and RFID product development
                                                              as well as heading up all manufacturing operations,
                                                              DRAM design, QA and R&D Process Fab.

Walter J. McCarthy, Jr.       1995      Director              Mr. McCarthy, 75, until his retirement in 1990, was the
                                                              Chairman and Chief Executive Officer of Detroit Edison
                                                              Company.  He has served as a consultant to ECD
                                                              since  1990.  Until 1995, Mr. McCarthy also served on
                                                              the Boards of Comerica Bank, Detroit Edison Company
                                                              and Federal-Mogul Corporation. He is a member of the
                                                              National Academy of Engineering.  Mr. McCarthy
                                                              serves as Chairman of the Compensation Committee
                                                              and is on the Audit Committee of the Board.

Florence I. Metz              1995      Director              Dr. Metz, 71, until her retirement in 1996, held various
                                                              executive positions with Inland Steel Company:
                                                              General Manager, New Ventures, Inland Steel
                                                              Company (1989-1991); General Manager, New
                                                              Ventures, Inland Steel Industries (1991-1992) and
                                                              Advanced Graphite Technologies (1992-1993);
                                                              Program Manager for Business and Strategic Planning
                                                              at Inland Steel (1993-1996).  Dr. Metz also serves on
                                                              the Board of Directors of Ovonic Battery.  She serves
                                                              on the  Compensation Committee of the Board.

James R. Metzger              2000      Director              Mr. Metzger, 53, currently a Vice President and the
                                                              Chief Technology Officer at Texaco, Inc., has held
                                                              various position with Texaco since joining Texaco in
                                                              1969.  Mr.  Metzger's responsibilities at Texaco include
                                                              Corporate Planning and Economics, Safety Health and
                                                              Environment, Corporate Services and Purchasing.  He
                                                              is a member of the Diversity Council, chairs the
                                                              Corporate Technology Council and serves on Texaco's
                                                              Executive Council, the company's senior leadership
                                                              team.  He is a member of the board of Alto Technology,
                                                              Magic Earth, White Plains Hospital Corp. and a Trustee
                                                              of Mercy College.  Mr. Metzger was appointed to
                                                              ECD's Board of Directors on July 27, 2000.


                                             -97-

<PAGE>


Nathan J. Robfogel(1)         1990      Director              Mr. Robfogel, 65, is currently Senior Counselor to the
                                                              President of the Rochester Institute of Technology
                                                              (RIT).  From 1996-1999, he served as Vice President
                                                              for University Relations of RIT, where he was also a
                                                              Trustee from 1985-1996.  For over 30 years and until
                                                              his retirement in 1996, Mr. Robfogel was a partner in
                                                              the law firm of Harter, Secrest & Emery, where he was
                                                              Managing Partner.  From 1989-1995, Mr. Robfogel was
                                                              Chairman of the Board and Chief Executive Officer of
                                                              the New York State Facilities Development
                                                              Corporation, a public benefit corporation.  He is a
                                                              member of the Board of Directors of Genesee Valley
                                                              Trust Company and Rochester Community Baseball,
                                                              Inc.

Stanley K. Stynes             1977      Director              Dr. Stynes, 68, was Dean of the College of
                                                              Engineering at Wayne State University from 1970 to
                                                              August 1985, and a Professor of Engineering at Wayne
                                                              State University from 1985 until his retirement in 1992.
                                                              He has been involved in various administrative,
                                                              teaching, research and related activities. Dr. Stynes
                                                              serves as Chairman of the Audit Committee of the
                                                              Board.

William M. Wicker             2000      Director              Mr. Wicker, 51, is currently a Senior Vice President at
                                                              Texaco Inc.  Prior to joining Texaco in 1997, Mr.
                                                              Wicker was a Managing Director at Credit Suisse First
                                                              Boston, which he joined in 1989.  Mr. Wicker's
                                                              responsibilities at Texaco include Texaco Power and
                                                              Gasification, Texaco Natural Gas, Texaco Pipeline
                                                              International and Texaco Energy Systems.  He serves
                                                              on Texaco's Executive Council, the company's senior
                                                              leadership team.  Mr.  Wicker was appointed to ECD's
                                                              Board of Directors on July 27, 2000.
-------

(1)     Messrs. Ito and Robfogel stepped down as Board members, effective July 2000, due to additional
        business responsibilities.

</TABLE>

                                             -98-

<PAGE>

        The executive officers of ECD are as follows:

<TABLE>
<CAPTION>

                                                                            Served As An Executive
           Name               Age                 Office                  Officer or Director Since
           ----               ---                 ------                  -------------------------

<S>                           <C>   <C>                                                <C>
Stanford R. Ovshinsky         77    President, Chief Executive Officer                 1960(1)
                                    and Director

Iris M. Ovshinsky             73    Vice President and Director                        1960(1)

Robert C. Stempel             67    Executive Director and Chairman of                 1995
                                    the Board

Nancy M. Bacon                54    Senior Vice President and Director                 1976

Hellmut Fritzsche             73    Vice President and Director                        1969

Subhash K. Dhar               49    President and Chief Operating                      1986
                                    Officer of Ovonic Battery and
                                    Director

Stephan W. Zumsteg            54    Treasurer                                          1997

-------

</TABLE>
(1)     The predecessor of ECD was originally founded in 1960.  The present
        corporation was incorporated in 1964 and is the successor by merger of
        the predecessor corporation.


        See above for information relating to Stanford R. Ovshinsky, Iris M.
Ovshinsky, Robert C. Stempel, Nancy M. Bacon, Hellmut Fritzsche and Subhash K.
Dhar.

        Stephan W. Zumsteg joined ECD in March 1997 and was elected Treasurer in
April 1997. Prior to joining ECD, Mr. Zumsteg was Chief Financial Officer of the
Kirlin Company from July 1996 to February 1997 and Vice President-Finance &
Administration and Chief Financial Officer of Lincoln Brass Works from July 1991
to June 1996.

                             COMPLIANCE WITH SECTION 16(A) OF THE
                               SECURITIES EXCHANGE ACT OF 1934

        Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and officers to file reports of ownership and changes in ownership
with respect to our securities and those of our affiliates with the Securities
and Exchange Commission and to furnish copies of these reports to us. Based on a
review of these reports and written representations from our directors and
officers regarding the necessity of filing a report, we believe that during
fiscal year ended June 30, 2000, all filing requirements were met on a timely
basis.


                                      -99-

<PAGE>

Item 11: Executive Compensation
-------  ----------------------

        The following table sets forth the compensation paid by ECD during its
last three fiscal years to its Chief Executive Officer and each of its other
four most highly compensated executive officers for the fiscal year ended June
30, 2000.

                                  SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>


                                   Annual                             Long Term
                                Compensation                        Compensation
                              -------------------               -------------------------
                                                                                                 All
                                                                 Restricted     Options          Other
     Name and Principal       Fiscal                                Stock      (Number of        Compen-
          Position            Year(1)   Salary(2)      Bonus        Award       Shares)          sation(3)
         ----------           -------   ------         -----       -------     ---------         ---------

<S>                             <C>        <C>                 <C>             <C>               <C>



Stanford R. Ovshinsky,          2000       $303,908                            106,611(4)        $12,657
President and Chief             1999       $294,929                              4,084(4)        $14,952
Executive Officer               1998       $284,967                             41,298(4)        $14,652

Robert C. Stempel,              2000       $270,004                   -           -              $ 5,035
Executive Director              1999       $270,004             $4,591,540(5)  300,000           $ 6,111
                                1998       $270,005                   -           -              $ 3,159

Iris M. Ovshinsky,              2000       $265,918                             71,074(4)        $12,657
Vice President                  1999       $257,941                              2,723(4)        $14,952
                                1998       $250,016                             27,533(4)        $13,569


Nancy M. Bacon,                 2000       $255,008                                              $ 6,538
Senior Vice President           1999       $254,854                                              $ 7,104
                                1998       $235,019                                              $ 5,796


Subhash K. Dhar, President     2000        $224,421                                              $ 5,829
and Chief Operating Officer,   1999        $220,001                                              $ 6,157
Ovonic Battery                 1998        $211,545                                              $ 5,283
-------

</TABLE>

(1)     ECD's fiscal year is July 1 to June 30.  ECD's 2000 fiscal year ended
        June 30, 2000.

(2)     Amounts shown include compensation deferred under ECD's 401 (k) Plan.
        Does not include taxable income resulting from exercise of stock
        options.


                                            -100-

<PAGE>


(3)     "All Other Compensation" is comprised of (i) contributions made by ECD
        to the accounts of each of the named executive officers under ECD's
        401(k) Plan with respect to each of the calendar years ended December
        31, 1999, 1998 and 1997, respectively, as follows: Mr. Ovshinsky $4,800
        for each of 1999 and 1998 and $4,500 for 1997; Dr. Ovshinsky $4,800 for
        each of 1999 and 1998 and $4,500 for 1997; Mrs. Bacon $4,800 for each of
        1999 and 1998 and $4,500 for 1997; Mr. Dhar $4,800 for each of 1999 and
        1998 and $4,500 for 1997; (ii) the dollar value of any life insurance
        premiums paid by ECD in the calendar years ended December 31, 1999, 1998
        and 1997, respectively, with respect to term-life insurance for the
        benefit of each of the named executives as follows: Mr. Ovshinsky $7,857
        for 1999 and $10,152 for each of 1998 and 1997; Mr. Stempel $5,035,
        $6,111, and $3,159; Dr. Ovshinsky $7,857, $10,152 and $9,069; Mrs. Bacon
        1,738, $2,304 and $1,296; Mr. Dhar $1,029, $1,357 and $783. Under the
        401 (k) Plan, which is a qualified defined-contribution plan, ECD makes
        matching contributions periodically on behalf of the participants in the
        amount of 50% of each such participant's contributions. These matching
        contributions were limited to 3% of a participant's salary, up to
        $160,000 for the three calendar years reported.

(4)     The stock options issued to Mr. and Dr. Ovshinsky are pursuant to Stock
        Option Agreements dated November 1993 which are subject to periodic
        antidilution protection adjustments based on changes in the number of
        outstanding shares of ECD Common Stock. Such adjustments are calculated
        quarterly as of the last day of each of our fiscal quarters and
        coincident with significant issuances of ECD Common Stock. (See Note G -
        Stock Option Plans, Warrants and Other Rights to Purchase Stock.)

(5)     Represents the market value, less consideration paid consisting of the
        par value $.01, of 430,000 shares of Common Stock awarded to Mr. Stempel
        under a Restricted Stock Agreement dated January 15, 1999. Such shares
        of Common Stock were exchanged for an equal number of shares of Class B
        Common Stock upon the approval by ECD's stockholders, at the Annual
        Meeting held on March 25, 1999, of a proposal to amend ECD's Certificate
        of Incorporation to authorize 430,000 shares of a new Class B Common
        Stock. See "Class B Common Stock." All shares of Restricted Stock will
        be deemed to vest if Mr. Stempel is serving as a director and officer of
        ECD on September 30, 2005 or upon the occurrence of a change in control
        of ECD. Dividends will be paid on the Restricted Stock if and to the
        extent paid on ECD's Common Stock generally. So long as Mr. Stempel
        continues to serve as a director of ECD and irrespective of whether the
        shares are deemed vested, he will be entitled to exercise all voting
        rights with respect to the Restricted Stock, including all preferential
        voting rights to which the Class B Common Stock may become entitled
        after the conversion of the Class A Common Stock. The value of Mr.
        Stempel's Restricted Stock at the close of ECD's fiscal year was
        $10,911,250.


                                      -101-

<PAGE>


                       OPTION GRANTS IN LAST FISCAL YEAR

        The following table sets forth all options granted to the named
executive officers during the fiscal year ended June 30, 2000.
<TABLE>
<CAPTION>


                                         Individual Grants
                         ---------------------------------------------------
                         Number of     Percent of                                 Potential Realizable Value at
                         Securities       Total                                      Assumed Annual Rates of
                         Underlying      Options       Exercise                    Stock Price Appreciation for
                          Options        Granted       of Base                             Option Term(1)
                          Granted     to Employees      Price     Expiration
         Name               (#)      in Fiscal Year     ($/Sh)        Date              5%               10%
         ----            ----------  --------------   ---------   -----------     --------------------------------

<S>                      <C>             <C>          <C>             <C>           <C>               <C>
Stanford R. Ovshinsky    106,611(2)      58.36%       $18.80(3)       (4)           $315,869.12       $420,824.84
Iris M. Ovshinsky        71,074(2)       38.91%       $18.80(3)       (4)           $210,578.29       $442,197.70


</TABLE>

(1)     The potential realizable value amounts shown illustrate the values that
        might be realized upon exercise immediately prior to the expiration of
        their term using 5% and 10% appreciation rates as required to be used in
        this table by the Securities and Exchange Commission, compounded
        annually, and are not intended to forecast possible future appreciation,
        if any, of the Company's stock price. Additionally, these values do not
        take into consideration the provisions of the options providing for
        nontransferability or termination of the options following termination
        of employment.

(2)     The options granted in fiscal year 2000 are pursuant to the antidilution
        protection adjustment feature contained in the Stock Option Agreement
        dated November 1993.  These adjustments are based on changes in the
        number of outstanding shares of ECD Common Stock and are calculated
        quarterly as of the last day of each of our fiscal quarters and
        coincident with significant issuances of ECD Common Stock. (See Note G -
        Stock Option Plans, Warrants and Other Rights to Purchase Stock.)

(3)     The exercise price is the weighted average exercise price of the stock
        options granted in fiscal year 2000.

(4)     November 18, 2003 or 12 months after termination of employment,
        whichever is later.





                                      -102-

<PAGE>


               AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
                          FISCAL YEAR END OPTION VALUES

        The following table sets forth all stock options exercised by the named
executives during the fiscal year ended June 30, 2000, and the number and value
of unexercised options held by the named executive officers at fiscal year end.

<TABLE>
<CAPTION>
                            Shares                   Number of Securities       Value of Unexercised
                         Acquired on    Value       Underlying Unexercised      in-the-Money Options
                           Exercise   Realized    Options at Fiscal Year End     at Fiscal Year End
       Name                  (#)         ($)      Exercisable/Unexercisable   Exercisable/Unexercisable
------------------          -----       -----     -------------------------   -------------------------

<S>                         <C>      <C>                  <C>                      <C>
Stanford R. Ovshinsky(1)    62,100   $765,750(2)          599,087/0                $7,797,551/$0
Iris M. Ovshinsky(3)        35,000   $420,437(4)          390,790/0                $5,077,892/$0
Robert C. Stempel(5)        34,000   $496,400(6)          604,000/0                $7,547,600/$0
Nancy M. Bacon(7)           23,000   $258,562(8)          162,200/0                $1,984,950/$0
Subhash K. Dhar(9)          6,888    $100,885(10)          62,040/0                 $535,095/$0

-------

</TABLE>

(1)     Mr. Ovshinsky's exercisable options are exercisable at a weighted
        average price of $13.36 per share.

(2)     Of the $765,750 value realized, approximately $265,000 was used to cover
        withholding taxes and other expenses associated with the exercise.

(3)     Dr. Ovshinsky's exercisable options are exercisable at a weighted
        average price of $12.38 per share.

(4)     Of the $420,437 value realized, approximately $148,000 was used to cover
        withholding taxes and other expenses associated with the exercise and
        $41,125 was used to purchase 3,500 shares of ECD Common Stock.

(5)     Mr. Stempel's exercisable options are exercisable at a weighted average
        price of $12.88 per share.

(6)     Of the $496,400 value realized, approximately $174,000 was used to cover
        withholding taxes and other expenses associated with the exercise and
        $102,700 was used to purchase 10,000 shares of ECD Common Stock.

(7)     Mrs. Bacon's exercisable options are exercisable at a weighted average
        price of $13.14 per share.

(8)     Of the $258,562 value realized, approximately $92,000 was used to cover
        withholding taxes and other expenses associated with the exercise.

(9)     Mr. Dhar's exercisable options are exercisable at a weighted average
        price of $16.75 per share.

(10)    Of the $100,885 value realized, approximately $38,000 was used to cover
        withholding taxes and other expenses associated with the exercise.


                                                -103-

<PAGE>

                           EMPLOYMENT AGREEMENTS

        On September 2, 1993, Stanford R. Ovshinsky entered into separate
employment agreements with each of ECD and Ovonic Battery in order to define
clearly his duties and compensation arrangements and to provide to each company
the benefits of his management efforts and future inventions. The initial term
of each employment agreement was six years. In February 1999, the Board of
Directors of ECD and Ovonic Battery renewed each of Mr. Ovshinsky's employment
agreements for an additional term ending September 30, 2005. Mr. Ovshinsky's
employment agreement with ECD provides for an annual salary of not less than
$100,000, while his agreement with Ovonic Battery provides for an annual salary
of not less than $150,000. Both agreements provide for annual increases to
reflect increases in the cost of living, discretionary annual increases as
determined by the Board of Directors of ECD and an annual bonus equal to 1% of
the net income from operations of ECD (excluding Ovonic Battery) or Ovonic
Battery. Mr. Ovshinsky's annual salary increases over the last three fiscal
years have been determined based upon increases in the cost of living as
determined by the Compensation Committee using as a guide the percentage
increase in the Consumer Price Index for the Detroit- metropolitan area
published by the Bureau of Labor Statistics.

        Mr. Ovshinsky's employment agreement with Ovonic Battery additionally
contains a power of attorney and proxy from ECD providing Mr. Ovshinsky with the
right to vote the shares of Ovonic Battery held by ECD following a change in
control of ECD. For purposes of the agreement, change in control means (i) any
sale, lease, exchange or other transfer of all or substantially all of ECD's
assets; (ii) the approval by ECD's stockholders of any plan or proposal of
liquidation or dissolution of ECD; (iii) the consummation of any consolidation
or merger of ECD in which ECD is not the surviving or continuing corporation;
(iv) the acquisition by any person of 30 percent or more of the combined voting
power of the then outstanding securities having the right to vote for the
election of directors; (v) changes in the constitution of the majority of the
Board of Directors; (vi) the holders of the Class A Common Stock ceasing to be
entitled to exercise their preferential voting rights other than as provided in
ECD's charter and (vii) bankruptcy. In the event of mental or physical
disability or death of Mr. Ovshinsky, the foregoing power of attorney and proxy
will be exercised by Dr. Iris M. Ovshinsky.

        Pursuant to his employment agreement with Ovonic Battery, Mr. Ovshinsky
was granted stock options, exercisable at a price of $16,129 per share to
purchase 186 shares (adjusted from a price of $50,000 per share to purchase 60
shares pursuant to the anti- dilution provisions of the option agreement) of
Ovonic Battery's common stock, representing approximately 6 percent of Ovonic
Battery's outstanding common stock. The Ovonic Battery stock options vest on a
quarterly basis over six years commencing with the quarter beginning October 1,
1993, subject to Mr. Ovshinsky's continued performance of his obligations to
Ovonic Battery under his employment agreement.

                                      -104-

<PAGE>

        In February 1998, the Compensation Committee of the Board of Directors
recommended and the Board of Directors approved an Employment Agreement between
ECD and Dr. Iris M. Ovshinsky. The purpose of the Employment Agreement is to
clearly define Dr. Ovshinsky's duties and compensation arrangements. The
Employment Agreement also provides for ECD to have the benefits of Dr.
Ovshinsky's services as a consultant to ECD following the termination of her
active employment for consulting fees equal to 50 percent of the salary payable
to Dr. Ovshinsky at the date of the termination of her active employment. Dr.
Ovshinsky shall have the right to retire at any time during her services as a
consultant and receive retirement benefits equal to the consulting fees for the
remainder of Dr. Ovshinsky's life.

        The initial term of Dr. Ovshinsky's employment period was until
September 2, 1999 and is automatically renewed for successive one-year periods
unless terminated by Dr. Ovshinsky or ECD upon 120 days notice in advance of the
renewal date. Dr. Ovshinsky's employment agreement provides for an annual salary
of not less than $250,000, annual increases to reflect increases in the cost of
living and discretionary annual increases, as determined by the Board of
Directors of ECD.

        On January 15, 1999, ECD entered into an Executive Employment Agreement
(Executive Employment Agreement) with Mr. Stempel. The Executive Employment
Agreement provides that Mr. Stempel will serve as the Executive Director of ECD
for a term ending September 30, 2005. During the term of his employment, Mr.
Stempel will be entitled to receive an annual salary as determined by the Board
of Directors from time to time. The Executive Employment Agreement also provides
for discretionary bonuses to be determined by the Board of Directors based on
Mr. Stempel's individual performance and the financial performance of ECD. The
Executive Employment Agreement also requires ECD to provide Mr. Stempel with
non-wage benefits, including insurance, pension and profit sharing, stock
options, automobile use or allowance and organizational membership fees, of the
types provided generally by ECD to its senior executive officers.

        The Executive Employment Agreement permits Mr. Stempel to retire as an
officer and employee of ECD and will permit him to resign his employment at any
time in the event he becomes subject to any mental or physical disability which,
in the good faith determination of Mr. Stempel, materially impairs his ability
to perform his regular duties as an officer of ECD. The Executive Employment
Agreement permits ECD to terminate Mr. Stempel's employment upon the occurrence
of certain defined events, including the material breach by Mr. Stempel of
certain non-competition and confidentiality covenants contained in the Executive
Employment Agreement, his conviction of certain criminal acts or his gross
dereliction or malfeasance of his duties as an officer and employee of ECD
(other than as a result of his death or mental or physical disability).

        Mr. Stempel's entitlement to compensation and benefits under the
Executive Employment Agreement will generally cease effective upon the date of
the termination of

                                      -105-

<PAGE>

his employment, except that ECD will be required to continue to provide Mr.
Stempel and his spouse with medical, disability and life insurance coverage for
the remainder of their lives or until the date they secure comparable coverage
provided by another employer.

                     COMPENSATION COMMITTEE REPORT

Compensation Committee.

        The Compensation Committee is composed of Mr. McCarthy (Chairman) and
Dr. Metz.  Neither of the Compensation Committee members are or were during the
last fiscal year an officer or employee of ECD or any of its subsidiaries, or
had any business relationship with ECD or any of its subsidiaries.

        The Compensation Committee is responsible for administering the policies
which govern both annual compensation of executive officers and ECD's stock
option plans. The Compensation Committee meets several times during the year to
review recommendations from management regarding stock options and compensation.
Compensation and stock option recommendations are based upon performance,
current compensation, stock option ownership, and years of service to ECD. ECD
does not have a formal bonus program for executives, although it has awarded
bonuses to its executives from time to time.

Compensation of Executive Officers.

        The Compensation Committee considers ECD's financial position and other
factors in determining the compensation of its executive officers. These factors
include remaining competitive within the relevant hiring market--whether
scientific, managerial or otherwise--so as to enable ECD to attract and retain
high quality employees, and, where appropriate, linking a component of
compensation to the performance of ECD's Common Stock--such as by a granting of
stock option or similar equity-based compensation--to instill ownership thinking
and align the employees' and stockholders' objectives. ECD has been successful
at recruiting and retaining and motivating executives who are highly talented,
performance-focused and entrepreneurial.

        During ECD's last fiscal year, the Compensation Committee determined
that ECD had achieved several important scientific and business milestones. The
Compensation Committee also concluded that the achievement of these milestones
had not yet been fully reflected in ECD's financial results. In light of ECD's
general policy of conserving available cash flow where possible to advance its
business objectives, the Compensation Committee determined that it was not
advisable to materially raise executive base salaries or grant material bonuses,
stock options or other compensation to ECD's executive officers.


                                      -106-

<PAGE>


Chief Executive Officer Compensation.

        In September 1993, Mr. Ovshinsky entered into separate employment
agreements with each of ECD and Ovonic Battery. The purpose of these agreements,
which provide for the payment to Mr. Ovshinsky of an annual salary of not less
than $250,000 by ECD and by Ovonic Battery, was to define clearly Mr.
Ovshinsky's duties and compensation arrangements and to provide to each company
the benefits of his management efforts and future inventions. See "Employment
Agreements." Mr. Ovshinsky's compensation for fiscal year 2000 was determined in
accordance with his Employment Agreements with ECD and Ovonic Battery. Based on
the factors described above with respect to the compensation of ECD's executive
officers, the Compensation Committee determined that it was not advisable to pay
a discretionary bonus to ECD's Chief Executive Officer for fiscal year 2000.

                                                       COMPENSATION COMMITTEE
                                                       Walter J. McCarthy, Jr.
                                                       Florence I. Metz

























                                      -107-

<PAGE>


                              PERFORMANCE GRAPH

        The line graph below compares the cumulative total stockholder return on
ECD's Common Stock over a five-year period with the return on the NASDAQ Stock
Market - U.S. Index and the Chase H & Q Technology Index.


<TABLE>
<CAPTION>

                                                Cumulative Total Return
                                  ----------------------------------------------------
                                   6/95     6/96     6/97     6/98     6/99     6/00
                                  ------   ------   ------   ------   ------   ------
<S>                               <C>      <C>      <C>      <C>      <C>      <C>
ENERGY CONVERSION DEVICES, INC.    100     140.00    78.46    59.62    61.16   156.15
NASDAQ STOCK MARKET (U.S.)         100     128.39   156.15   205.58   296.02   437.30
CHASE H & Q TECHNOLOGY             100     116.87   152.63   193.34   312.92   548.97

</TABLE>


        The total return with respect to NASDAQ Stock Market - U.S. Index and
the Chase H & Q Technology Index assumes that $100 was invested on June 30,
1995, including reinvestment of dividends.

        We have not paid any cash dividends in the past and do not expect to pay
any in the foreseeable future.

        The Report of the Compensation Committee on Executive Compensation and
the Performance Graph are not deemed to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, or Securities
Exchange Act of 1934, as amended, or incorporated by reference in any documents
so filed.

                                      -108-

<PAGE>


Item 12: Security Ownership of Certain Beneficial Owners and Management
-------- --------------------------------------------------------------

                             CLASS A COMMON STOCK

        Mr. Stanford R. Ovshinsky and his wife, Dr. Iris M. Ovshinsky (executive
officers, Directors and founders of ECD), own of record 153,420 shares and
65,601 shares, respectively (or approximately 69.8% and 29.8%, respectively), of
the outstanding shares of Class A Common Stock. Such shares are owned directly
or indirectly through certain trusts of which Mr. and Dr. Ovshinsky are
co-trustees. Common Stock is entitled to one vote per share and each share of
Class A Common Stock is entitled to 25 votes per share. Class A Common Stock is
convertible into Common Stock on a share-for-share basis at any time and from
time to time at the option of the holders, and will be deemed to be converted
into Common Stock on a share-for-share basis on September 30, 2005. At ECD's
Annual Meeting held on March 25, 1999, ECD's stockholders approved a proposal to
amend ECD's Certificate of Incorporation changing the date on which shares of
Class A Common Stock are deemed to be converted into shares of Common Stock from
September 14, 1999 to September 30, 2005. Under applicable Delaware law, the
September 30, 2005 mandatory conversion date may be extended in the future from
time to time with approval of ECD's stockholders voting together as a single
class.

        As of September 22, 2000, Mr. Ovshinsky also had the right to vote
126,500 shares of Common Stock (Sanoh Shares) owned by Sanoh Industrial Co.,
Ltd. (Sanoh) under the terms of an agreement dated as of November 3, 1992
between ECD and Sanoh which, together with the Class A Common Stock and 14,989
shares of Common Stock Mr. and Dr. Ovshinsky own, give Mr. and Dr. Ovshinsky
voting control over shares representing approximately 23.09% of the combined
voting power of ECD's outstanding stock.

        The following table sets forth, as of September 22, 2000, information
concerning the beneficial ownership of Class A Common Stock by each director and
all executive officers and directors of ECD as a group. All shares are owned
directly except as otherwise indicated. Under the rules of the Securities and
Exchange Commission, Stanford R. Ovshinsky and Iris M. Ovshinsky may each be
considered to beneficially own the shares held by the other.

                                      -109-

<PAGE>

<TABLE>
<CAPTION>

                                  Class A
Name of                        Common Stock           Total Number of Shares
Beneficial Owner           Beneficially Owned(1)(2)     Beneficially Owned       Percentage of Class
-------------------------  ------------------------   -----------------------    -------------------

<S>                               <C>                      <C>                       <C>
Stanford R. Ovshinsky             153,420                  153,420                   69.8%

Iris M. Ovshinsky                  65,601                   65,601                   29.8%

All other executive
officers and directors as
a group (13 persons)                __                       __                       __
Total                             219,021                  219,021                   99.6%
-------
</TABLE>

(1) The balance of the 219,913 shares of Class A Common Stock outstanding, 892
    shares, or approximately 0.4%, are owned by other members of Mr. and Dr.
    Ovshinsky's family.  Neither Mr. nor Dr. Ovshinsky has voting or investment
    power with respect to such shares.

(2) On November 10, 1995, the Compensation Committee recommended, and the Board
    of Directors approved, an amendment to Mr. and Dr. Ovshinsky's Stock Option
    Agreements dated November 18, 1993 (the "Agreements") to permit Mr. and Dr.
    Ovshinsky to exercise a portion (126,082 and 84,055 shares, respectively) of
    their existing Common Stock option for Class A Common Stock on the same
    terms and conditions as provided in the Agreements. The shares of Class A
    Common Stock issuable upon exercise of the options under the Agreements, as
    amended, are not included in the number of shares indicated in the above
    table, but are included in the shares of Common Stock beneficially
    owned by Mr. and Dr. Ovshinsky (see table of beneficial ownership of Common
    Stock on page 107).

                              CLASS B COMMON STOCK

        At ECD's Annual Meeting held on March 25, 1999, ECD's stockholders
approved a proposal to increase ECD's authorized capital stock and to authorize
430,000 shares of a new Class B Common Stock. All of the authorized shares of
Class B Common Stock were awarded to Mr. Robert C. Stempel pursuant to the terms
of a Restricted Stock Agreement dated as of January 15, 1999 between ECD and Mr.
Stempel.

        The terms of the Class B Common Stock are substantially similar to those
of ECD's Class A Common Stock. The principal difference between the Class A
Common Stock and the Class B Common Stock is with respect to voting rights. Each
share of Class B Common Stock will initially entitle the holder to one vote on
all matters to be voted upon by ECD's stockholders. However, each share of Class
B Common Stock will become entitled to 25 votes as of the first date upon which
all of the outstanding shares of Class A Common Stock have been converted into
Common Stock and no shares of Class A Common Stock are outstanding. The
preferential voting rights of the Class B Common Stock, if triggered, will
expire on September 30, 2005.


                                      -110-

<PAGE>


        The Class B Common Stock will be convertible into Common Stock on a
share-for-share basis at any time at the option of the holder.  In addition,
the Class B Common Stock will be deemed to be converted into Common Stock on
September 30, 2005. Under applicable Delaware law, the September 30, 2005
mandatory conversion date may be extended in the future from time to time with
approval of ECD's stockholders voting together as a single class.

                                 COMMON STOCK

        Directors and Executive Officers. The following table sets forth, as of
September 22, 2000, information concerning the beneficial ownership of Common
Stock by each director and executive officer and for all directors and executive
officers of ECD as a group. All shares are owned directly except as otherwise
indicated.


                                   Amount and Nature of
Name of Beneficial Owner         Beneficial Ownership(1)           % of Class(2)
------------------------         -----------------------           -------------
 Robert C. Stempel                    1,070,404(3)                    5.52%

 Stanford R. Ovshinsky                  850,847(4)                    4.45%

 Iris M. Ovshinsky                      461,640(5)                    2.45%

 Nancy M. Bacon                         175,215(6)                     *

 Subhash K. Dhar                         59,040(7)                     *

 Hellmut Fritzsche                       20,710(8)                     *

 Seymour Liebman                         13,527(9)                     *

 Walter J. McCarthy, Jr.                 13,187                        *

 Stanley K. Stynes                       12,884                        *

 Stephan W.  Zumsteg                     10,000(10)                    *

 Florence I. Metz                         9,884(11)                    *

 Umberto Colombo                          8,151(12)                    *

 Tyler Lowrey                             8,000(13)                    *

 William M.  Wicker                                                    -

 James R.  Metzger                                                     -

 All executive officers and           2,713,489                      13.03%
 directors as a group
 (15 persons)

 ----------
 * Less than 1%.
                                      -111-

<PAGE>


 (1)      Under the rules and regulations of the Securities and Exchange
          Commission, a person is deemed to be the beneficial owner of a
          security if that person has the right to acquire beneficial ownership
          of such security within sixty days, whether through the exercise of
          options or warrants or through the conversion of another security.

 (2)      Under the rules and regulations of the Securities and Exchange
          Commission, shares of Common Stock issuable upon exercise of options
          and warrants or upon conversion of securities which are deemed to be
          beneficially owned by the holder thereof (see Note (1) above) are
          deemed to be outstanding for the purpose of computing the percentage
          of outstanding securities of the class owned by such person but are
          not deemed to be outstanding for the purpose of computing the
          percentage of the class owned by any other person.

 (3)      Includes 430,000 shares of Class B Common Stock, 579,000 shares
          represented by options exercisable within 60 days.

 (4)      Includes 561,187 shares (adjusted as of June 30, 2000) represented by
          options exercisable within 60 days, the 126,500 Sanoh Shares over
          which Mr. Ovshinsky has voting power and 153,420 shares of Class A
          Common Stock which are convertible into Common Stock. Under the rules
          and regulations of the Securities and Exchange Commission, Mr.
          Ovshinsky may be deemed a beneficial owner of the shares of Common
          Stock and Class A Common Stock owned by his wife, Iris M. Ovshinsky.
          Such shares are not reflected in Mr. Ovshinsky's share ownership in
          this table.

 (5)      Includes 390,790 shares (adjusted as of June 30, 2000) represented by
          options exercisable within 60 days and 65,601 shares of Class A Common
          Stock which are convertible into Common Stock. Under the rules and
          regulations of the Securities and Exchange Commission, Dr. Ovshinsky
          may be deemed a beneficial owner of the shares of Common Stock and
          Class A Common Stock owned by her husband, Stanford R. Ovshinsky. Such
          shares are not reflected in Dr. Ovshinsky's share ownership in this
          table.

 (6)      Includes 150,200 shares represented by options exercisable within 60
          days.

 (7)      Includes 59,040 shares represented by options exercisable within 60
          days.

 (8)      Includes 8,980 shares represented by options exercisable within 60
          days.

 (9)      Includes 12,000 shares represented by options exercisable within 60
          days.

 (10)     Includes 8,000 shares represented by options exercisable within 60
          days.

 (11)     Includes 3,000 shares represented by options exercisable within 60
          days.

 (12)     Includes 5,000 shares represented by options exercisable within 60
          days.

 (13)     Includes 7,000 shares represented by options exercisable within 60
          days.



        Principal Shareholders. The following table sets forth, as of September
 22, 2000, to the knowledge of ECD, the beneficial holders of more than 5% of
 ECD's Common Stock (see footnotes for calculation used to determine "percentage
 of class" category):

                                      -112-

<PAGE>



 Name and Address of                 Amount and Nature of
 Beneficial Holder                   Beneficial Ownership    Percentage of Class
 -------------------                 --------------------    -------------------

 TRMI Holdings Inc.                      3,742,800(1)             19.65%
 2000 Westchester Avenue
 White Plains, NY 10650

 Stanford R. and Iris M. Ovshinsky       1,312,487(2)              6.9%(3)(4)
 1675 West Maple Road

 Troy, Michigan 48084
 Canon Inc.                              1,071,905(5)              5.83%
 30-2 Shimomaruko, 3-chome ohta ku
 Tokyo 146-8501 - Japan

 Robert C. Stempel                       1,070,404(6)              5.51%(3)
 1675 West Maple Road
 Troy, Michigan 48084



 (1)    Based upon information contained in Schedule 13-D filed with the
        Securities and Exchange Commission by Texaco Inc. and dated as of June
        8, 2000. Pursuant to the Stock Purchase Agreement dated as of May 1,
        2000, Texaco has agreed that (i) so long as it beneficially owns an
        aggregate of 5% of ECD's Common Stock and (ii) so long as Mr. and Dr.
        Ovshinsky are the beneficial owners of Class A Common Stock, or Mr.
        Stempel is the beneficial owner of Class B Common Stock, Texaco will
        vote its ECD Common Stock in accordance with the votes cast by the
        holders of Class A Common Stock (prior to its conversion) or Class B
        Common Stock (after conversion of the Class A Common Stock).

 (2)    Includes 219,021 shares of Class A Common Stock owned by Mr. and Dr.
        Ovshinsky (which shares are convertible at any time into Common Stock
        and will be deemed to be converted into Common Stock on September 30,
        2005), 14,989 shares of Common Stock owned by Mr. and Dr. Ovshinsky,
        126,500 shares of Sanoh Shares over which Mr. Ovshinsky has voting
        rights and 951,977 (adjusted as of June 30, 2000) shares represented by
        options exercisable within 60 days.

 (3)    Under the rules and regulations of the Securities and Exchange
        Commission, shares of Common Stock issuable upon exercise of options and
        warrants or upon conversion of securities which are deemed to be
        beneficially owned by the holder thereof are deemed to be outstanding
        for the purpose of computing the percentage of outstanding securities of
        the class owned by such person but are not deemed to be outstanding for
        the purpose of computing the percentage of the class owned by any other
        person.

 (4)    Represents the sum of Mr. and Dr. Ovshinsky's respective ownership
        interests calculated separately.

 (5)    Based upon information contained in Schedule 13-D filed with the
        Securities and Exchange Commission by Canon Inc. and dated April 21,
        2000.

 (6)    Includes 430,000 shares of Class B Common Stock owned by Mr. Stempel
        (which shares are convertible at any time into Common Stock and will be
        deemed to be converted into Common Stock on September, 30, 2005) 61,404
        shares of Common Stock and 579,000 shares represented by options
        exercisable within 60 days.

                                      -113-

<PAGE>


 Item 13:   Certain Relationships and Related Transactions
 --------   ----------------------------------------------

 Texaco

        Pursuant to the Stock Purchase Agreement between ECD and Texaco Inc.
 dated as of May 1, 2000, Texaco purchased a 20% equity stake in ECD for $67.4
 million. As part of this Stock Purchase Agreement, Texaco has rights to
 purchase additional shares of ECD Common Stock or other ECD securities (ECD
 Stock).

        So long as Texaco owns more than 5% of ECD Stock and in the event ECD
 issues additional ECD Stock other than to Texaco, Texaco has the right to
 purchase additional ECD Stock in order for Texaco to maintain its same
 proportionate interest in ECD Stock as Texaco held prior to the issuance of the
 additional ECD Stock. If Texaco elects to purchase ECD Common Stock, the
 purchase price will be the average of the closing price on NASDAQ of the ECD
 Common Stock as reported in The Wall Street Journal for the five trading days
 prior to the closing date of the sale multiplied by the number of shares of the
 ECD Common Stock which Texaco is entitled to purchase.

        If Texaco does not exercise its right to purchase additional ECD Stock
 within 15 days after delivery of a Rights Notice from ECD, Texaco's right to
 purchase such additional ECD Stock which are the subject of the Rights Notice
 will terminate. William M. Wicker and James R. Metzger, directors of ECD, are
 respectively Senior Vice President and Vice President and Chief Technology
 Officer of Texaco.

 Ovonyx

        Stanford R. Ovshinsky, Robert C. Stempel and Tyler Lowrey, directors of
 ECD, are directors of Ovonyx.  Tyler Lowrey is also President and Chief
 Executive Officer of  Ovonyx.  ECD currently owns 41.7% of Ovonyx and Mr.
 Lowrey owns in excess of 10% of Ovonyx.

        Through June 30, 2000, the Company recorded revenues of $2,686,000 from
 Ovonyx most of which was for product development services performed for Ovonyx
 prior to March 31, 2000.

 GM Ovonic

        Stanford R. Ovshinsky and Robert C. Stempel, directors of ECD, are
 members of the Board of Managers of GM Ovonic. Ovonic Battery has a 40%
 interest in this joint venture.


                                      -114-

<PAGE>

        For the year ended June 30, 2000, the Company had revenues of $4,233,000
 from GM Ovonic for the sales of products and providing contract personnel
 services, facilities and product development services.

 Ovonic Media

        Stanford R. Ovshinsky and Robert C. Stempel, directors of ECD, are
 members of the Alliance Board of Ovonic Media. ECD has a 49% interest in this
 joint venture.


        For the year ended June 30, 2000, the Company had revenues of $634,000
 from Ovonic Media for providing product development services.

 United Solar

        Stanford R. Ovshinsky, Robert C. Stempel, Nancy M. Bacon and Hellmut
 Fritzsche, directors of ECD, are directors of United Solar. The financial
 statements of United Solar are included in the consolidated financial
 statements of ECD for the period from April 11, 2000 through June 30, 2000.

        For the period from July 1, 1999 through April 10, 2000, the Company
 recorded revenues of $149,000 from United Solar for services performed for
 United Solar under a product development subcontract.

 Bekaert ECD Solar Systems

        Stanford R. Ovshinsky, Robert C. Stempel and Nancy M. Bacon, directors
 of ECD, are members of the Management Committee of Bekaert ECD Solar Systems,
 of which United Solar owns 40%.

        Bekaert ECD Solar Systems was formed on April 11, 2000 and for the
 period from April 11, 2000 through June 30, 2000, the Company recorded revenues
 of $78,000 from Bekaert ECD Solar Systems for miscellaneous services.

 Southwall

        Robert C. Stempel, a director of ECD, is a member of the Board of
 Directors of Southwall.

        For the year ended June 30, 2000, the Company had revenues of $1,597,000
 from Southwall under a contract to build large-area deposition equipment. The
 completed equipment was shipped to Southwall in July 2000. $691,000 of the sale
 price is included in accounts receivable at June 30, 2000.

                                      -115-
<PAGE>



        Herbert Ovshinsky, Stanford R. Ovshinsky's brother, is employed by ECD
 as Director of the Production Technology and Machine Building Division working
 principally in the design of manufacturing equipment. He received $142,508 in
 salary during the year ended June 30, 2000.

        HKO Media, Inc., owned by Harvey Ovshinsky, Stanford R. Ovshinsky's son,
 performed video production services on behalf of ECD.  HKO Media, Inc. was paid
 $69,507 by ECD for its services during the fiscal year ended June 30, 2000.





                                      -116-

<PAGE>


                                   PART IV

Item 14: Exhibits, Financial Statement Schedules and Report on Form 8-K

(a)   1.     Financial Statements

             See Part II.                                                  Page
                                                                           ----

      2.     Financial Statement Schedules

             The following is included in Part II, Item 8:

                     Independent Auditors' Report............................49

<TABLE>
<CAPTION>

      Other financial statements and financial statement schedules are omitted
      (1) because of the absence of the conditions under which they are required
      or (2) because the information called for is shown in the financial
      statements and notes thereto.

      3.     Exhibits (including those incorporated by reference)

                                                                                           Page or
                                                                                          Reference
                                                                                          ---------
<S>                                                                                           <C>

3.1       Restated Certificate of Incorporation filed September 29, 1967                      (a)

3.2       Certificate of Amendment to Certificate of Incorporation filed                      (b)
          February 24, 1998, increasing authorized shares of the Company's
          Common Stock from 15,000,000 shares to 20,000,000 shares

3.3       Certificate of Amendment of Incorporation filed January 27, 2000                    (c)
          increasing authorized shares of the Company's Common Stock
          from 20,000,000 shares to 30,000,000

3.4       Certificate of Amendment to Certificate of Incorporation filed March                (d)
          25, 1999 extending voting rights of the Company's Class A Common
          Stock, increasing the authorized capital stock of the Company's
          Common Stock to 20,930,000 shares, and authorizing 430,000
          shares of Class B Common Stock

3.5       Bylaws in effect as of July 17, 1997                                                (e)

3.6       Amendment to Article VIII of the Bylaws effective as of April 27,                   (f)
          2000

4.1       Agreement among the Company, Stanford R. Ovshinsky and Iris M.                      (g)
          Ovshinsky relating to the automatic conversion of Class A Common
          Stock into the Company's Common Stock upon the occurrence of
          certain events, dated September 15, 1964


                                               -117-

<PAGE>


10.1      Amendment to the Patent License Agreement dated December 5,                         (h)
          1986 between the Company and Matsushita Electric Industrial Co.,
          Ltd.

10.2      License Agreement and Supplemental Understanding dated                              (i)
          February 10, 1989 between Varta Batterie AG and the Company
          and Ovonic Battery Company

10.3      Charter of the Soviet-American Joint Venture, Sovlux, dated                         (j)
          January 11, 1990

10.4      Agreement on the Establishment and Activity of the Soviet-American                  (k)
          Joint Venture, Sovlux, dated January 11, 1990

10.5      License and Joint R&D Agreement entered into as of February 20,                     (l)
          1990 by and between Hitachi Maxell, Ltd., the Company and Ovonic
          Battery Company, Inc.

10.6      Amended Master Agreement made and entered into by and                               (m)
          between the Company and Matsushita Electric Industrial Co., Ltd.
          dated January 24, 1991

10.7      Memory Patent License Agreement made and entered into by and                        (n)
          between the Company and Matsushita Electric Industrial Co., Ltd.
          dated January 24, 1991

10.8      Memory Patent License Agreement by and between the Company                          (o)
          and Asahi Chemical Industry Co., Ltd. dated April 26, 1991

10.9      License Agreement by and between the Company, Ovonic Battery                        (p)
          and Samsung Electronics Co., Ltd. dated June 10, 1991

10.10     License Agreement between the Company, Ovonic Battery and                           (q)
          Sylva Industries Limited dated June 14, 1991

10.11     License Agreement by and between the Company and Ovonic                             (r)
          Battery and Harding Energy Systems, Inc. dated August 28, 1991

10.12     License Agreement made as of November 20, 1991 by and between                       (s)
          the Company, Ovonic Battery and Hyundai Motor Company

10.13     Memory Patent License Agreement effective as of April 1, 1992 by                    (t)
          and between the Company and Plasmon Limited

10.14     Option License Agreement effective as of September 8, 1992 by                       (u)
          and between the Company, Ovonic Battery and Sylva Industries
          Limited

10.15     Memory Patent License Agreement dated as of February 3, 1993                        (v)
          between the Company and Toshiba Corporation

10.16     License Agreement between the Company and a Japanese Battery                        (w)
          Manufacturer filed confidentially pursuant to Rule 24b-2


                                               -118-

<PAGE>


10.17     Intercompany Services Agreement dated as of September 2, 1993                       (x)
          between the Company and Ovonic Battery Company, Inc.

10.18     Executive Employment Agreement dated as of September 2, 1993                        (y)
          between the Company, Ovonic Battery Company, Inc. and Stanford
          R. Ovshinsky

10.19     Executive Employment Agreement dated as of September 2, 1993                        (z)
          between the Company and Stanford R. Ovshinsky

10.20     Stock Option Agreement by and between Ovonic Battery Company,                       (aa)
          Inc. and Stanford R. Ovshinsky dated as of November 18, 1993

10.21     Stock Option Agreement by and between the Company and                               (bb)
          Stanford R. Ovshinsky dated as of November 18, 1993

10.22     Stock Option Agreement by and between the Company and Iris M.                       (cc)
          Ovshinsky dated as of November 18, 1993

10.23     Stock Purchase Agreement by and between Sanoh Industrial Co.,                       (dd)
          Ltd., the Company and Ovonic Battery dated December 31, 1993

10.24     Stakeholder Agreement between Ovonic Battery Company, Inc. and                      (ee)
          General Motors Corporation for the organization of GM Ovonic
          L.L.C.  dated  June 14, 1994  filed  confidentially pursuant to  Rule
          24b-2

10.25     Consumer Battery License Agreement effective as of December 15,                     (ff)
          1994 by and between the Company, Ovonic Battery Company, Inc.
          and Sanyo Electric Co., Ltd., filed confidentially pursuant to Rule
          24b-2

10.26     Consumer Battery License Agreement effective as of December 20,                     (gg)
          1994 by and between the Company, Ovonic Battery Company, Inc.
          and Toshiba Battery Co., Ltd., filed confidentially pursuant to Rule
          24b-2

10.27     Second Amendment to Sylva/ECD/OBC License Agreement                                 (hh)
          effective as of January 1, 1995 by and between the Company,
          Ovonic Battery Company, Inc. and Sylva Industries, Ltd., portions
          of which have been filed confidentially pursuant to Rule 24b-2

10.28     Consumer battery agreement effective as of January 10, 1995 by                      (ii)
          and between the Company, Ovonic Battery Company, Inc. and a
          consumer battery manufacturer, portions of which have been filed
          confidentially pursuant to Rule 24b-2

10.29     Battery License Agreement dated March 28, 1995 by and between                       (jj)
          Ovonic Battery Company, Inc. and Walsin Technology Corp.,
          portions of which have been filed confidentially pursuant to Rule
          24b-2


                                               -119-

<PAGE>


10.30     Amendment to License and Joint R&D Agreement effective as of                        (kk)
          March 31, 1995 by and between Hitachi Maxell, Ltd., the Company
          and Ovonic Battery Company, Inc., portions of which have been
          filed confidentially pursuant to Rule 24b-2

10.31     Energy Conversion Devices, Inc. 1995 Non-Qualified Stock Option                     (ll)
          Plan

10.32     Memory Patent License Agreement by and between Toray                                (mm)
          Industries, Inc. and the Company effective as of April 1, 1995

10.33     Amendment Agreement by and between Varta Batterie A.G., the                         (nn)
          Company and Ovonic Battery effective as of June 8, 1995, portions
          of which have been filed confidentially pursuant to Rule 24b-2

10.34     Amendment to License Agreement by and between Samsung                               (oo)
          Display Devices Co., Ltd., the Company and Ovonic Battery
          effective as of June 23, 1995, portions of which have been filed
          confidentially pursuant to Rule 24b-2

10.35     Amendment Agreement by and between Eveready Battery                                 (pp)
          Company, Inc., the Company and Ovonic Battery effective as of
          June 23, 1995, portions of which have been filed confidentially
          pursuant to Rule 24b-2

10.36     License Agreement effective as of September 30, 1995 by and                         (qq)
          between Ovonic Battery Company, Inc. and Sanoh Industrial Co.,
          Ltd., portions of which have been filed confidentially pursuant to
          Rule 24b-2

10.37     Consumer Battery Agreement effective as of September 29, 1995                       (rr)
          by and between Ovonic Battery Company, Inc. and Furukawa
          Battery Co., Ltd., portions of which have been filed confidentially
          pursuant to Rule 24b-2

10.38     Battery License Agreement by and between Ovonic Battery                             (ss)
          Company, Inc. and Asia Pacific Investment Co. dated January 4,
          1996, filed confidentially pursuant to Rule 24b-2

10.39     Stock Purchase Agreement executed May 14, 1996, by and among                        (tt)
          Honda Motor Co., Ltd., the Company and Ovonic Battery Company,
          Inc.

10.40     Settlement Agreement effective as of March 28, 1996, by and                         (uu)
          among the Company, Ovonic Battery Company, Inc., Saft America,
          Inc. ("Saft") and certain entities affiliated with Saft, portions
          of which have been filed confidentially pursuant to Rule 24b-2

10.41     Executive Employment Agreement dated as of February 19, 1998                        (vv)
          between the Company and Iris M. Ovshinsky


                                               -120-
<PAGE>


10.42     Executive Employment Agreement, Restricted Stock Agreement and                      (ww)
          Stock Option Agreement dated as of January 15, 1999 between the
          Company and Robert C. Stempel

10.43     Stock Purchase Agreement by and between the Company and                             (xx)
          TRMI Holdings Inc. dated as of May 1, 2000

10.44     Foundation Agreement dated as of March 17, 2000 between United                      127
          Solar Systems Corp., Bekaert Corporation and the Company

10.45     Limited Liability Agreement effective as of April 11, 2000 by and                   172
          between United Solar Systems Corp. and Bekaert Corporation

21.1      List of all direct and indirect subsidiaries of the Company                         (yy)

23.1      Consent of Independent Auditors                                                     208

27.1      Financial Data Schedule (Edgar version)                                             (zz)


</TABLE>
                             Notes to Exhibit List

(a)        Filed as Exhibit 2-A to the Company's Form 8-A and incorporated
           herein by reference.

(b)        Filed as Exhibit 3.5 to the Company's Registration Statement on Form
           S-3 (Registration No. 333-50749) and incorporated herein by
           reference.

(c)        Filed as Exhibit 3.6 to the Company's Registration Statement on Form
           S-3 (Registration No. 333-33266) and incorporated herein by
           reference.

(d)        Filed as Exhibit 3.3 to the Company's Annual Report on Form 10-K for
           the fiscal year ended June 30, 1999 and incorporated herein by
           reference.

(e)        Filed as Exhibit 3.10 to the Company's Annual Report on Form 10-K for
           the fiscal year ended June 30, 1997, as amended, and incorporated
           herein by reference.

(f)        Filed as Exhibit 3.8 to the Company's Registration Statement on Form
           S-3 (Registration No. 333-42758) and incorporated herein by
           reference.

(g)        Filed as Exhibit 13-D to the Company's Registration Statement on Form
           S -1 (Registration No. 2-26772) and incorporated herein by reference.

(h)        Filed as Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended December 31, 1986 and incorporated herein by
           reference.

(i)        Filed as Exhibit 10.71 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1989, as amended, and incorporated
           herein by reference.


                                               -121-

<PAGE>


(j)        Filed as Exhibit 10.82 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1990, as amended, and incorporated
           herein by reference.

(k)        Filed as Exhibit 10.83 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1990, as amended, and incorporated
           herein by reference.

(l)        Filed as Exhibit 10.92 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1990, as amended, and incorporated
           herein by reference.

(m)        Filed as Exhibit 28.1 to the Company's Current Report on Form 8-K
           dated February 6, 1991 and incorporated herein by reference.

(n)        Filed as Exhibit 28.2 to the Company's Current Report on Form 8-K
           dated February 6, 1991 and incorporated herein by reference.

(o)        Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended March 31, 1991 and incorporated herein by
           reference.

(p)        Filed as Exhibit 10.114 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1991, as amended, and incorporated
           herein by reference.

(q)        Filed as Exhibit 10.115 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1991, as amended, and incorporated
           herein by reference.

(r)        Filed as Exhibit 10.116 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1991, as amended, and incorporated
           herein by reference.

(s)        Filed as Exhibit 10.72 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1992, as amended, and incorporated
           herein by reference.

(t)        Filed as Exhibit 10.75 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1992, as amended, and incorporated
           herein by reference.

(u)        Filed as Exhibit 10.81 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1992, as amended, and incorporated
           herein by reference.

(v)        Filed as Exhibit 10.87 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1993 and incorporated herein by
           reference.

(w)        Filed as Exhibit 10.94 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1993 and incorporated herein by
           reference.

(x)        Filed as Exhibit 10.96 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1993 and incorporated herein by
           reference.

(y)        Filed as Exhibit 10.100 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1993 and incorporated herein by
           reference.

                                      -122-

<PAGE>


(z)        Filed as Exhibit 10.101 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1993 and incorporated herein by
           reference.

(aa)       Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended September 30, 1993 and incorporated herein by
           reference.

(bb)       Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended September 30, 1993 and incorporated herein by
           reference.

(cc)       Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended September 30, 1993 and incorporated herein by
           reference.

(dd)       Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended December 31, 1993 and incorporated herein by
           reference.

(ee)       Filed as Exhibit 10.75 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1994 and incorporated herein by
           reference.

(ff)       Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended December 31, 1994 and incorporated herein by
           reference.

(gg)       Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended December 31, 1994 and incorporated herein by
           reference.

(hh)       Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended March 31, 1995 and incorporated herein by
           reference.

(ii)       Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended March 31, 1995 and incorporated herein by
           reference.

(jj)       Filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended March 31, 1995 and incorporated herein by
           reference.

(kk)       Filed as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended March 31, 1995 and incorporated herein by
           reference.

(ll)       Filed as Exhibit 10.77 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1995 and incorporated herein by
           reference.

(mm)       Filed as Exhibit 10.78 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1995 and incorporated herein by
           reference.

(nn)       Filed as Exhibit 10.79 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1995 and incorporated herein by
           reference.

(oo)       Filed as Exhibit 10.80 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1995 and incorporated herein by
           reference.

                                      -123-

<PAGE>


(pp)       Filed as Exhibit 10.81 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1995 and incorporated herein by
           reference.

(qq)       Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended September 30, 1995 and incorporated herein by
           reference.

(rr)       Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
           for the quarter ended September 30, 1995 and incorporated herein by
           reference.

(ss)       Filed as Exhibit 28.1 to the Company's Current Report on Form 8-K
           dated January 4, 1996 and incorporated herein by reference.

(tt)       Filed as Exhibit 10.73 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1996 and incorporated herein by
           reference.

(uu)       Filed as Exhibit 10.74 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1996 and incorporated herein by
           reference.

(vv)       Filed as Exhibit 10.63 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 1998 and incorporated herein by
           reference.

(ww)       Filed as Exhibits B, C and D, respectively, to the Company's Proxy
           Notice and Statement dated February 23, 1999.

(xx)       Filed as Exhibit 10.43 to the Company's Annual Report on Form 10-K
           for the fiscal year ended June 30, 2000, as amended, and incorporated
           herein by reference.

(yy)       Filed as Exhibit 21.1 to the Company's Annual Report on Form 10-K for
           the fiscal year ended June 30, 2000, as amended, and incorporated
           herein by reference.

(zz)       Filed as Exhibit 27.1 to the Company's Annual Report on Form 10-K for
           the fiscal year ended June 30, 2000, as amended, and incorporated
           herein by reference.


(b)        Reports on Form 8-K

           No reports on Form 8-K were filed during the last quarter of the
           period covered by this Report.



                                      -124-

<PAGE>


                                  SIGNATURES

           Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                ENERGY CONVERSION DEVICES, INC.



                                By:    /s/ Stanford R. Ovshinsky
                                       -----------------------------------------
                                       Stanford R. Ovshinsky,
                                       President and Chief Executive Officer
Dated: August 16, 2001                 (Principal Executive Officer)



           Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:





/s/ Stanford R. Ovshinsky        President, Chief Executive
-----------------------------    Officer and Director            August 16, 2001
Stanford R. Ovshinsky            (Principal Executive Officer)



/s/ Stephan W. Zumsteg           Treasurer
----------------------------     (Principal Financial and        August 16, 2001
Stephan W. Zumsteg               (Accounting Officer)



/s/ Robert C. Stempel            Director
-------------------------------  (Chairman of the Board)         August 16, 2001
Robert C. Stempel


/s/ Nancy M. Bacon               Director
-------------------------------                                  August 16, 2001
Nancy M. Bacon


                                      -125-

<PAGE>



/s/ Umberto Colombo              Director
------------------------------                                   August 16, 2001
Umberto Colombo



/s/ Subhash K.  Dhar             Director
-------------------------------                                  August 16, 2001
Subhash K.  Dhar


                                 Director
---------------------------------                                August 16, 2001
Hellmut Fritzsche


/s/ Tyler Lowrey                 Director
---------------------------------                                August 16, 2001
Tyler Lowrey


/s/ Walter J. McCarthy, Jr.      Director
------------------------------                                   August 16, 2001
Walter J. McCarthy, Jr.


/s/ Florence I. Metz             Director
---------------------------------                                August 16, 2001
Florence I. Metz


/s/ James R. Metzger             Director
-------------------------------                                  August 16, 2001
James R.  Metzger


/s/ Iris M. Ovshinsky            Director
---------------------------------                                August 16, 2001
Iris M. Ovshinsky


/s/ Stanley K. Stynes            Director
---------------------------------                                August 16, 2001
Stanley K. Stynes


/s/ William M.  Wicker           Director
---------------------------------                                August 16, 2001
William M.  Wicker


                                      -126-